India’s automotive industry is among the major contributors to overall GDP, which stood at about 7% in FY 2020 and the same for manufacturing GDP was an impressive 49%. The impact of COVID-19 has been instrumental in forcing a decline of 0.5 percentage points between 2019 and 2020 for overall GDP contribution by the auto sector. As the situation with regard to the COVID-19 pandemic seemed to be stabilizing to some extent, the emergence of the Omicron variant has again put paid to hopes of any semblance of recovery that was being witnessed. Governments across the world are still grappling with how to tackle the situation and ensure people’s safety and security. India, too, has not been an exception in this respect, with overall vehicle demand likely to be impacted based on evolving scenarios. For the auto industry in India, the festive season of Diwali and marriages, too, brought little cheer, though expectations from the rural sector still remain buoyant, but not upbeat.

Sales of around 3.5 million units of passenger and commercial vehicles in India in 2020 made it the fifth-largest auto market globally, with the potential of being ranked third-largest by 2030. The two-wheeler market is the most dominant, accounting for over 80% of production and sales, which is followed by passenger and commercial vehicles and three-wheelers making up the balance. A large young and middle class population preferring ease of mobility and growing demand from the rural markets have resulted in increasing India’s two-wheeler penetration rate. Within the passenger cars segment, the demand is greater for small and mid-sized cars, though the market for SUVs has also seen considerable increase.

Despite the sizeable share of two-wheelers in India, the market witnessed a y-o-y decline of 26% in October 2021, with a month-on-month growth being a minimal 1%. This can, to a large extent, be attributed to the constantly rising petrol prices that have exceeded the psychological barrier of ₹100-per liter mark across the country. Virtually all major two-wheeler OEMs registered heavy decreases in volume sales, ranging from -16% for Suzuki Motorcycle India to -35% for Royal Enfield.

On the contrary, India’s electric vehicles segment has been witnessing significant and consistent growth in recent years, owing to wider availability, increasing fuel prices and eco-friendliness. The government has embarked on an ambitious initiative of achieving 100% electrification of vehicles by the year 2030, since it has recognized that relying on mobility based primarily on fuel is not a sustainable approach. Given that India’s electric vehicles market is projected to be in excess of US$205 billion by 2030, there would still be the need to infuse capital of over US$180 billion in vehicle production and charging infrastructure to realize the proposed target.