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Indian automobile industry anticipates boost in demand by wedding season and recovery of infra projects
Equities, Markets - January 29, 2025

PLI scheme 2.0 can boost Indian automobile sector at full capacity

PLI scheme 2.0 can boost Indian automobile sector at full capacity

To boost Make in India movement in different sectors of the country, the Production Linked Incentive (PLI) scheme has acted as one of the solid foundations. The PLI scheme for Indian auto and its component industries has played a major role in their development. The PLI 1.0 scheme recorded a good response. Despite this, it also faced some challenges such as auto and its component companies must maintain a minimum 50 percent of domestic value addition. It also needs to increase its investment and sales levels on a yearly basis.

Concerns in terms of sales and investments
The PLI scheme for the auto industry creates different levels of investment goals for the firms to attain in a period of time. As the companies achieve these goals, the amount of investment increases for the companies. Its aim is to encourage huge capital investment in the sector. This scheme aspires for growth and development in automobile and its component industries. Except three-wheelers and two-wheeler auto makers, the segments under Champion manufacturers should expand investment levels from about INR 300 crore in the financial year 2023 to reach about INR 2,000 crore in the financial year 2028. Further, the three-wheeler and two-wheeler manufacturers who currently have to fulfill a requirement of INR 150 crore need to increase investment of about INR 1,000 crore. Similarly, the new entry firms and auto component manufacturers also have to maintain these investment targets.

Apart from investment targets, OEM have to maintain sales targets. The champion auto manufacturer has to reach the goal of INR 125 crore of sales in its first year. It has to fulfil the goal of expansion of annual sales by about 10 percent. On other hand, auto component makers have to maintain the target of INR 25 crore sales in the first year. It also has to achieve the goal of 10 percent growth annually. It becomes difficult for new entry firms to fulfil targets of savings and investments as they also have to work on their entry in the market and building production levels.

Requirements of domestic value addition
The scheme focuses on maintaining 50 percent of domestic value addition. It requires the companies to make the product from using atleast half of the domestic resources only. This target helps the government of India to fulfil the objective of contraction in import levels of raw material and also promote self-sufficiency. However, it adversely affects the development of high-tech auto technologies like advanced sensors, electric powertrains, and semiconductors.

It becomes challenging for new entry companies and small suppliers to keep up with the exhaustive documentation requirements. These documentation requirements track down the sources of supplier networks (consist of tier 2 and 3). Further, some suppliers are worried about possible disclosures of pricing information on purchases.

These meticulous documentation needs are due to challenges faced in schemes such FAME II. The postponement of SOP for DVA in the month of April 2023 caused issues in the efficiency of the scheme, even after an additional one year was given to resolve the issue.

Recommendation for PLI 2.0
The auto and its component companies make investments at different levels of progress of the project. It leads to creation of capital work in progress which is not completely used in the single financial year. To make precise calculation of total investments, it must be added too.

Following DVA target of 50 percent is crucial for global auto companies as they mainly acquire raw material through importing from other countries. It is also important to do thorough analysis of the prevailing supply network in India. In addition to this, digitization of documentation and verification processes will make it more transparent and easier. It is also important to give required training and help to small suppliers in the supply network in order to help them follow the rules with no worries of disclosure of pricing information.

The scheme can work on giving incentives for Research and development in areas of new technology and also for achieving the goal of technology transfer in manufacturing of the product. This will motivate international auto manufacturers to establish centers of Research and Development as well as do joint ventures across India. The scheme can also adopt providing stimulus based on achieving certain milestones. It will lead to injecting a small amount of financing when certain goals are achieved. Overall, it will help in promotion of production in the country.

The PLI 2.0 scheme with necessary changes in certain segments like compliance, stimulus structure, and timelines can help to promote investment in automobiles and its component industry in India. It can aid the development of the industry of production of electric vehicles to high-tech battery technologies.

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India’s export in auto industry reach 19 percent

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Indian Government prepares to make ecosystem for premium Electric Vehicles
Autos, Business, Equities, Markets - January 20, 2025

Indian Government prepares to make ecosystem for premium Electric Vehicles

Indian Government prepares to make ecosystem for premium Electric Vehicles

The government of India wants to develop an EV ecosystem for premium Electric Vehicles. Last year, the Indian government encouraged investment in manufacturing of premium EVs at the local level through the scheme known as Scheme for Manufacturing Electric Car (SMEC). The SMEC was announced on 15th March, 2024.

To support this goal, the government wants to invest in research and development (R&D). It also wants to provide funds for establishment of separate specialized production lines particularly for EVs in the midst of existing factories. It helps to streamline production of EVs and also does not disturb production of other vehicles. The official guidelines regarding the schemes will be announced soon.

About the SMEC scheme
The main goal of the scheme was to uplift the investment in production of premium Electric cars at local level. It is to promote manufacturing at the local level. The scheme gives import relaxation of about 15 percent for a duration of 5 years. The automakers can import EV vehicles of minimum worth, freight cost and insurance of $ 35,000 with benefit of this reduced import duty. However, the automakers have to make an investment of at least 500 million dollars to establish local production of EVs in order to obtain this benefit of import duty relaxation to 15 percent.

Discussion with Auto Industry stakeholders
This resolution of focus on R&D and separate production lines for EVs was taken after the meeting with auto industry shareholders in the previous week. The meeting was at the final round and the government decided to take an approach of investment in R&D as well as creation of separate specialized production lines for EVs in the existing production facilities.

Apart from this, companies are permitted to make an investment of about 500 million dollars in the new construction projects for EVs. The auto makers are supposed to make an investment in duration of three years from the date of approval under the SMEC. Only after following this criteria, the company can benefit from lower import duties. The requirement for investments in Research and Development is similar to the existing requirements of the Auto production-linked incentive (PLI) scheme.

The recent meeting was not attended by Vin Fast and Tesla. Despite this, several automakers such as Toyota, Škoda-VW, Hyundai, and Mercedes Benz India showcased liking for the scheme.

These interested automakers are quite worried about the amount of investment required for creation of specialized production lines for Electric Vehicles only. To make a big investment of amounts such as Rs. 4,000 crore, there should be a large-scale operation to make the project practical and successful. Automakers believe that investments in research and development will promote creation of advanced technology in Electric vehicles.

The reason for worries about the investment amount is due to 89,000 Electric vehicles being sold in India in the year 2023. The worth of these Electric vehicles were higher than Rs. 25 lakhs. This makes it difficult for local companies to make a large amount of investments. In midst of increasing disposable income levels of population and expansion of the Indian economy, the sales growth of Electric Vehicles is projected to hike at a quicker pace.

In conclusion, the Indian government aims to make sure that rising demand for Electric vehicles is fulfilled by local automakers only. The government also wants to build a favourable environment for production of advanced technologies and premium EV cars. To achieve these goals, it has implemented schemes like SMEC.

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Solid reason for GST reduction on two-wheelers

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TVS Motor Reports 7% Sales Surge in December, Reaching 3.2 Lakh Units

TVS Motor Reports 7% Sales Surge in December, Reaching 3.2 Lakh Units

TVS Motor, the third-largest motorcycle company in India in terms of revenue. The company registered a sales surge in the month of December by 7 percent compared to the previous year of the same period. The monthly sales of the company increased by 321,787 units in the month of December 2024 as compared to 301,898 units of sales in the same period of the previous year.

The December month was good for automakers as most of the car and bike manufacturers gave a strong performance in terms of sales.

Sales of TVS motors
The TVS company registered a growth of 8 percent in their total two-wheelers sales which accounts for units in the 312,002 month of December 2024 compared to 290,064 units of sales in the month of December 2023. While sales of domestic two-wheelers recorded around 215,075 units of sales in December 2024 compared to 214,988 units of sales in December 2023.

While the total sales of motorcycles was recorded at 144,811 units in the month of December 2024 compared to 148,049 units in the month of December 2023. The overall sales of the scooter recorded an increase in sales growth by 30 percent. It observed an increase in sales growth by sales of 133,919 units in the month of December 2024 against sales of 103,167 units in December 2023. The sales of EVs vehicles by the company was 20,171 units in December 2024 compared to sales of 11,288 units in the month of Decmber 2023. It indicated an increased growth by 79 percent.

The total sales of three-wheelers of the TVS company is recorded at 9,685 units in the month of December compared to the previous year’s same period which registered sales of 11,834 units.

Exports of the TVS Motors
Total exports of the company surged to 22 percent in the month of December 2024. It recorded an increase in export units by recording 104,393 units in December 2024 and 85,391 units sold in the same period of the previous year. While the company’s export in two-wheelers recorded a growth of around 29 percent. Its performance in exports of two-wheelers is 96,927 units in December 2024 compared to exports of 75,076 units in the same month of the last year.

Comparison of third quarter of the financial year
In the third quarter of this financial year, strong sales growth was observed which accounted for 11 percent growth. This third quarter recorded total sales of 11.8 lakh units compared to 10.6 lakh units in the same quarter of the financial year 2023-2024.

Performance of other Auto Companies
As per the data released by Tata Motors, the sales observed in the third quarter of the financial year 2024-2025 by Tata Motors in the international and domestic markets is around 235,599 units of sales compared to its sales units account to 234,981 units during the third quarter of the financial year 2023-2024. Its sales on the domestic level increased only 1 percent which accounted for 76,599 units of sales compared to 76,138 compared to previous year of the same period.

Ashok Leyland company’s combined sales of domestic and international accounts for increased sales at 5 percent higher in the month of december 2024 compared to previous year of the same month. The sales of the month of December 2024 was around 16,957 units compared to 16,154 units of sales in the month of December 2023.

One of the reasons for the increase in sales could be due to many automakers signalling that they probably would raise the price of a cars per unit in the New Year.

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Strong Growth in India’s Auto Components Industry: A Positive Outlook for FY25

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Indian automobile industry anticipates boost in demand by wedding season and recovery of infra projects
Business, Equities, Market News, Markets - January 6, 2025

Auto Components Industry Maintains Capex Plans Amidst Growth Moderation

Auto Components Industry Maintains Capex Plans Amidst Growth Moderation

The Indian Auto component industry is projected to have high single digits growth in the financial year 2025 by the Rating Agency ICRA. To estimate this growth rate of the Indian Auto component industry, ICRA used a sample of 46 auto ancillaries with total annual revenue of over Rs 3,00,000 crore in the financial year 2024. It is supported by the 14 percent growth recorded in the industry in the financial year 2024. It is important to point out that more than half of the Indian auto component industry sales is done by the domestic original equipment manufacturers (OEM) in India. In the current quarters, the automotive sales are observed to be slowing down. This could adversely impact the demand for auto components from the domestic OEMs.

Not only does the demand for automotive components for the manufacturing of vehicles slow down but also the demand for components in the after-sales markets. After having a strong growth for like two to three years, it is forecasted to slow down by five percent to seven percent in the financial year 2025.

The Indian automotive component industry close to one-third of the revenues comes from the export of automotive components. The export segment is also expected to face slowdown in growth due to fall in growth in consumer markets. Despite this, supplies to new platforms will rise due to vendor diversification steps taken by the global OEM companies and rise in outsourcing. The new platform refers to companies which incorporate the latest technologies and promote innovations. The OEM supplying the latest technologies models will be able to align better with the changing dynamics in the automobile industry and will also be able to generate growth. While vendor diversification will help companies to not remain dependent on a single entity and can diverse risk and make a more resilient supply chain. Both outsourcing and vendor diversification is a good opportunity for Indian auto component companies to increase their growth and become competitive with the global world.

In the European Union region, automotive companies announced shutdown of plants and big layoffs. This could be an opportunity for Indian auto components manufacturers in metal casting and forgings. The Indian companies will have opportunities in the international replacement or after-sales market segment due to ageing of vehicles and sale of used vehicles in the global markets.

The ICRA reports that the Indian auto components players will have opportunities in electric vehicles (EV), vehicle premiumisation and localisation of auto components. The growth for the auto components players will be supported by the changes in the regulatory norms. Currently, supply chanin of Electric Vehicles is 30 percent to 40 percent localised. Chassis components are produced locally which need minimum technological progress. Also considerable localisation is observed in control units, battery management systems and traction motors over the period. The battery cells are still imported and it accounts for 35 percent to 40 percent of the vehicle cost. Although it seems like localisation is a key advantage for growth of domestic OEMs, low level of localization can also act as an advantage for them. For instance, technological advancement can occur for the parts used in internal combusion engine (ICE) vehicles as well as production of components for vehicles which use alternate fuels.

While considering the growth of the auto component industry, it is important to take its profitability into consideration. As per the reports of ICRA, the sector’s operating margins are anticipated to remain in the range of 11 percent to 11.5 percent in the financial year 2025. One of the reasons for this is double and for some routes triple container rates due to disruption in the Red Sea route in the year 2024 as compared to the previous year. India’s auto components are exported around two-third to North America and Europe and around one-third of auto components are imported from these regions only. The considerable increase in freight rates would adversely impact profit margins for upcoming few quarters. The margins in the medium term will get advantage from good operating leverage, increased in value or components in the vehicle. However, it will also remain vulnerable to any kind of sharp volatility in foreign exchange rates and prices of commodities.

Despite moderate growth, ICRA forecasts the auto component industry to continue with its capital expenditure plans (Capex). The plan for the financial year 2025 will be around 15,000-20,000 crore and for the financial year 2026, it will be around 20,000-25,000 crore. It is expected that mostly internal accruals will be used for operating income of around 7 to 8 percent in the medium term. While funding for larger projects like battery cells localisation is through debt initially. Aside from capex used for capacity building and coming regulatory changes, the incremental investment will be used for development of advanced technology, products and EV components. Also according to ICRA, the industry’s liquidity position will remain in a good position especially for Tier-1 Suppliers due to stable cash flows and earnings. Also the coverage metrics will remain good due to stable internal accruals and low incremental debt financing despite rise in the cost of borrowings.

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Auto Sector Eyes 5% Growth in 2025

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Auto industry closes 2024 in top gear with record-breaking car sales

Auto industry closes 2024 in top gear with record-breaking car sales

The year 2024 for the Auto Industry closed with a record of domestic wholesales of 4.3 million vehicles, surpassing the previous record of 4.11 million units in 2023. The companies such as Maruti Suzuki, Hyundai, Tata Motors, Mahindra & Mahindra, Toyota Kirloskar Motor and Kia observed their best-ever annual domestic sales. The Indian Auto Industry mostly registered wholesale dispatches and not retail sales to customers. Despite this, Indian Vehicles retail sales grew by 9% in 2024 as it reached a record of nearly 26.1 million units. The retail sales record surpassed the pre-covid peak demand of 254 million units set in 2018. It marked the full recovery of the auto industry which faced slowdown due to the pandemic and higher than the 24 millions units sales in 2023. Making India one of the few economies to surpass the pre-Covid levels.

Maruti Suzuki India Ltd, India’s largest passenger vehicle manufacturer registered its highest-ever wholesale and retail sales in 2024. The key reasons behind the growth in sales was due to continued growth of SUVs and strong demand in the rural market. Maruti Suzuki India Ltd (MSIL) Senior Executive Officer (Marketing and Sales) Partho Banerjee gave the reason for the strong demand in the rural market is due to good monsoon and good MSP prices.

The strengthening sales growth is backed by strong growth since October, 2024. Previously, the first half of the fiscal year faced slow growth due to general and state elections and extreme weather conditions such as heatwaves. The people preferred to stay indoors during summer and the urban market was hit by the effects of the elections as well. The car sales picked up pace in the month of October as it grew by 1% and in November by 4 %. The Passenger Vehicles (PVs) makers faced a change from the start of the festive season. In the Indian automobile industry, the domestic passenger vehicle wholesales rose by 11% year-on-year (Y-o-Y). It was supported by the year-end discounts, strong demand for SUVs (sports utility vehicles), strengthening recovery in the urban market and robust sales of CNG-based cars. It is important to point out the share of SUV’s sale in the annual PV volume sales of the industry is about 55 percent in 2024 surpassing the previous years growth of less than 50 percent. The Y-o-Y growth of Maruti Suzuki India Ltd. was around 24.2 percent which indicated the record of its domestic PV wholesales in December 2024 around 130,117 units. Again here, Mr. Banerjee of the Maruti Suzuki India Ltd. (MSIL) stated that this remarkable performance was achieved due to the company’s ability to achieve its goal to reduce its network stock (stock with dealers) from 38 days’ worth of stock to 10 days. Currently, it has a network stock of 9 days. While the CNG-based cars sales for the MSIL is about 576,000 units which is a 33 percent Y-o-Y growth rate.

Major Companies with robust domestic PV sales
The Maruti Suzuki India Limited definitely hit the top in the Domestic PV sales by achieving both strong growth rate in wholesale and retail sales. It was attributed to its plan of reducing network stocks and strong CNG-based growth. Also despite having flat growth in the urban market, it registered a 10.1 percent Y-o-Y growth rate increase in the rural market. The key models contributing to the growth of the company were Invicto, Grand Vitara and Ertigo.While Tata Motors observed a moderate growth in domestic PV wholesales increased by 1.4 percent in 2024 which is around 44,289 units compared to 42,750 units in the year 2023. Tata Motors’ new launches in the SUV portfolio such as Curvv and Nexon.ev 45 were the key drivers in its sales growth. India’s second largest carmaker by volume, Hyundai faced a slowdown in domestic sales volumes by 42,208 units in December 2024. It led to a fall in sales growth rate by around 1.3 percent Y-oY. Despite this, its flagship SUV Creta achieved record-breaking domestic sales of 186,919 units yearly which contributes to 67.6 percent of total PV sales of Hyundai in the year 2024. Creta is a SUV leader for Hyundai. While Toyata observed the sales growth of 16.4 percent Y-o-Y in the month of December 2024 and accounts for a rise in overall volume sales in 2024 by 40 percent. The major companies’ sales patterns show an increase in preference of SUVs resulting in robust growth in sales.

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Business, Equities, Market News, Markets - December 23, 2024

Mahindra & Toyota Drive SUV Boom Amid Industry Challenges

Mahindra & Toyota Drive SUV Boom Amid Industry Challenges

Mahindra & Toyota Drive SUV Boom Amid Industry Challenges
In 2024, India’s automotive industry has witnessed significant shifts, with Mahindra & Mahindra and Toyota Kirloskar Motor achieving record sales despite prevailing challenges. This trend underscores the evolving dynamics of the Indian car market, characterized by a growing consumer preference for SUVs and strategic adaptations by manufacturers.

Mahindra & Mahindra’s Performance
Mahindra & Mahindra has experienced a remarkable surge in sales, particularly in the SUV segment. In October 2024, the company reported its highest-ever SUV sales, delivering 54,504 vehicles—a 25% year-over-year increase compared to the same month in 2023.
NDTV
This achievement marks the second consecutive month of record-breaking sales for Mahindra, reflecting its successful alignment with consumer preferences favoring larger vehicles.

The company’s robust performance is further evidenced by its financial results. In the second quarter, Mahindra reported a 13.2% rise in profit to ₹38.41 billion, surpassing analysts’ expectations. This growth is attributed to higher SUV sales and a recovery in tractor demand, with SUV volumes rising by 19% despite industry-wide challenges.
Reuters

Toyota Kirloskar Motor’s Performance
Toyota Kirloskar Motor has also demonstrated impressive growth. In October 2024, the company reported a 41% year-over-year increase in sales, delivering 30,845 units. Domestic sales accounted for 28,138 units, while exports contributed 2,707 units.
The New Indian Express
This performance highlights Toyota’s strong market presence and its ability to meet the rising demand for SUVs in India.

Market Dynamics and Consumer Preferences
The Indian automotive market has been increasingly dominated by SUVs, with consumers showing a clear preference for these vehicles over smaller cars. This shift is evident in the sales figures of major manufacturers. For instance, Maruti Suzuki, traditionally known for its small cars, reported a 19.4% increase in SUV sales in October 2024, achieving record-high figures in this segment.

This trend towards SUVs is driven by several factors, including the perception of better safety, higher ground clearance suitable for diverse Indian terrains, and a growing aspirational value associated with owning larger vehicles. Manufacturers like Mahindra and Toyota have capitalized on this shift by expanding their SUV portfolios and introducing models that cater to the evolving preferences of Indian consumers.

Industry Challenges
Despite these successes, the industry faces challenges, including fluctuating demand and inventory management issues. In September 2024, dealer inventories reached critically high levels of up to 85 days, prompting concerns about overstocking. However, the festive season in October helped reduce these inventories to more manageable levels, as manufacturers and dealers offered promotions to boost sales.

Additionally, the industry has been navigating the transition towards electric vehicles (EVs) and adhering to stricter emission norms. While the demand for EVs is gradually increasing, the current market is still predominantly driven by internal combustion engine vehicles, particularly SUVs. Manufacturers are balancing the need to invest in future technologies with the immediate demand for conventional vehicles.

Strategic Implications for Investors
For investors, the strong performance of Mahindra & Mahindra and Toyota Kirloskar Motor indicates a positive outlook for companies with a robust SUV lineup and the ability to adapt to market trends. Mahindra’s consistent growth in SUV sales and its strategic positioning in the agricultural sector through its tractor business provide a diversified revenue stream, enhancing its investment appeal.

Toyota’s emphasis on quality and its expanding portfolio in the Indian market also make it a noteworthy player. Its ability to achieve significant sales growth amidst industry challenges reflects operational efficiency and market adaptability.

However, investors should remain cognizant of the broader industry challenges, including inventory management and the ongoing transition to EVs. Companies that effectively navigate these challenges while aligning with consumer preferences are likely to sustain growth and offer favorable returns.

Conclusion
The record sales achieved by Mahindra & Mahindra and Toyota Kirloskar Motor in 2024 underscore the dynamic nature of the Indian automotive market. The growing consumer preference for SUVs has been a significant driver of this growth, with manufacturers that align their strategies accordingly reaping substantial benefits. While challenges persist, the ability to adapt to market trends and manage operational complexities will be crucial for sustained success in this evolving industry landscape.

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Indian Auto Components Industry Grows 11.3% in H1 FY25

Indian Auto Components Industry Grows 11.3% in H1 FY25

The Indian auto components industry has demonstrated robust growth in the first half of the fiscal year 2024-25 (H1 FY25), achieving an 11.3% increase in market size compared to the same period in the previous year. According to a report by the Automotive Component Manufacturers Association (ACMA), the industry’s valuation rose from USD 36.1 billion in H1 FY24 to USD 39.6 billion in H1 FY25.

Market Dynamics and Consumer Preferences
Several key trends have contributed to this growth, reflecting evolving consumer preferences across various vehicle segments:

Passenger Vehicles (PVs): There has been a notable shift towards larger vehicles, particularly Utility Vehicles (UVs). The UV segment experienced a 13% increase in demand, with UV1 models—vehicles measuring between 4,000 to 4,400 mm in length and priced under ₹20 lakh—seeing a substantial 25% surge in sales.

Two-Wheelers: The market for motorcycles with higher engine capacities has expanded significantly. Sales of motorcycles with engine capacities ranging from 350cc to 500cc soared by 74%, indicating a consumer preference for more powerful two-wheelers.

Electric Vehicles (EVs): The EV segment exhibited mixed results. Overall EV sales increased by 22% in H1 FY25 compared to the same period last year. Electric two-wheelers (e-2Ws) led this growth with a 26% rise in sales. However, electric passenger vehicles (e-PVs) experienced a 19% decline in sales, suggesting potential challenges in consumer adoption or market offerings in this sub-segment.

Factors Driving Growth
The industry’s growth can be attributed to several factors:

Economic Recovery: Post-pandemic economic recovery has bolstered consumer confidence, leading to increased spending on automobiles and, consequently, auto components.

Government Initiatives: Policies promoting manufacturing and the adoption of electric vehicles have provided a conducive environment for industry expansion.

Technological Advancements: The integration of advanced technologies in vehicles has increased the demand for sophisticated auto components, contributing to market growth.

Challenges and Considerations
Despite the positive trajectory, the industry faces certain challenges:

Supply Chain Disruptions: Global supply chain issues, including semiconductor shortages, have impacted production schedules and could pose risks to sustained growth.

EV Adoption Barriers: The decline in e-PV sales highlights potential obstacles in the electric vehicle market, such as inadequate charging infrastructure, higher upfront costs, or limited consumer awareness.

Outlook
The Indian auto components industry is poised for continued growth, supported by favorable economic conditions and evolving consumer preferences. However, addressing supply chain challenges and enhancing the ecosystem for electric vehicles will be crucial for sustaining this momentum.

In conclusion, the 11.3% growth in H1 FY25 underscores the resilience and adaptability of the Indian auto components industry amid changing market dynamics and consumer behaviors.

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Auto Industry Nears ₹25,000 Cr Import Reduction Target

Auto Industry Nears ₹25,000 Cr Import Reduction Target

The Indian automotive industry is on course to achieve its ambitious goal of reducing imports by ₹25,000 crore (approximately $3 billion) by the end of the current fiscal year. This initiative focuses on increasing the localization of advanced components such as electric motors, airbags, and automatic transmissions. Industry assessments indicate that significant progress has been made, with further advancements anticipated in the coming years.

Localization Efforts and Achievements
In an effort to reduce dependency on imports, the Society of Indian Automobile Manufacturers (SIAM) and the Automotive Component Manufacturers Association (ACMA) have spearheaded localization programs targeting 11 critical categories, including drive transmissions, engines, steering systems, electronics, and electrical parts. These components account for about 70% of total imports in the sector.

Between FY20 and FY22, the industry achieved net localization gains of ₹7,018 crore. Building on this momentum, there is an ongoing effort to realize an additional ₹17,977 crore in net localization by FY25. This cumulative effort is expected to meet the ₹25,000 crore import reduction target set for the current fiscal year.

Shradha Suri Marwah, President of ACMA, highlighted the industry’s progress, stating, “Value-addition from the Indian auto components industry has gone up significantly in the last couple of years. In the first phase (till FY22), we achieved double the target of attaining localization level at about 6%. The second phase is underway. The industry is targeting deepening localization by another 15%.”
ECONOMIC TIMES

Investments and Technological Advancements
To support these localization efforts, component manufacturers are investing in new facilities and technologies. This includes the development of advanced manufacturing processes and the adoption of cutting-edge technologies to produce complex components domestically. Such investments not only reduce import dependence but also enhance the competitiveness of Indian manufacturers in the global market.

Government Initiatives and Policy Support
The Indian government has introduced several initiatives to bolster the automotive sector’s localization efforts. The Performance-Linked Incentive (PLI) scheme, for instance, aims to promote the production of electric vehicles and hydrogen fuel vehicles, with an allocation of ₹26,000 crore (US$3.61 billion). This scheme is expected to generate approximately 750,000 direct jobs in the auto sector and reduce the country’s carbon footprint.
WIKIPEDIA

Additionally, the government’s focus on developing infrastructure for electric vehicles and promoting sustainable mobility solutions further supports the industry’s localization objectives.

Impact on the Indian Economy
The localization drive is anticipated to have a positive impact on the Indian economy by reducing the trade deficit and fostering the growth of the domestic manufacturing sector. By producing critical components locally, the industry can retain more value within the country, create employment opportunities, and stimulate economic development.

Moreover, the increased focus on localization aligns with India’s vision of becoming a global automotive hub. Projections indicate that the Indian auto market is poised to reach USD 300 billion by 2026, driven by rising income levels, urbanization, and a burgeoning middle class.
ECONOMIC TIMES

Challenges and Future Outlook
While significant progress has been made, the industry faces challenges in achieving deeper localization. These include the need for substantial capital investment, development of technical expertise, and ensuring quality standards that meet global benchmarks.

To address these challenges, collaboration between industry stakeholders, government bodies, and educational institutions is essential. Such partnerships can facilitate skill development, research and development, and the creation of a robust supply chain ecosystem.

Looking ahead, the Indian automotive industry is expected to continue its localization efforts, with reassessments and the setting of new targets in consultation with the government. This ongoing commitment to reducing import dependence and enhancing domestic manufacturing capabilities positions India favorably in the global automotive landscape.

In conclusion, the Indian automotive industry’s concerted efforts towards localization are yielding tangible results, bringing the sector closer to its import reduction targets. With continued investments, policy support, and collaborative initiatives, the industry is well-positioned to achieve its goals and contribute significantly to the nation’s economic growth.

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Maruti Suzuki Pioneers Small-Town Sales with Arena Satellite Concept

Maruti Suzuki Pioneers Small-Town Sales with Arena Satellite Concept

Maruti Suzuki, the biggest automaker in India, is breaking new ground in order to take advantage of the potential of the semi-urban and small-town markets. The company recently disclosed its goal to broaden its reach by building Arena Satellite showrooms in order to further penetrate areas where conventional full-sized showrooms would not be feasible or financially viable. This action shows Maruti’s commitment to upholding its dominance in the Indian auto market as well as its keen understanding of the shifting needs and tastes of consumers residing in smaller towns.

For many years, Maruti Suzuki has been at the forefront of the Indian auto industry, gaining trust from drivers with its trustworthy, affordable, and fuel-efficient cars. Urban markets are very close to saturation, especially in tier-1 locations. Meanwhile, the need for vehicles is increasing in smaller towns and semi-urban areas due to increased salaries, changing lifestyles, and improved infrastructure. In these locations, there is a growing trend of individuals buying their first vehicles and upgrading from two-wheelers to four-wheelers.

Maruti Suzuki’s plan to focus on these tiny communities is backed by a lot of facts. According to recent surveys, non-metropolitan areas make up about 40% of the company’s total revenues. This figure is expected to increase as long as the economies of these regions continue to grow. Maruti Suzuki is adding Arena Satellite stores in an effort to capture a larger share of this growing industry.

The Arena Satellite showrooms showcase a novel approach to auto sales. Unlike conventional dealerships, which need substantial investments and floor space, these satellite showrooms are compact, cost-effective, and strategically placed to maximise exposure and accessibility. The goal is to get traction in unexplored or underdeveloped areas without having to pay the hefty overhead costs associated with traditional dealerships.

The Swift, WagonR, and Baleno—Maruti Suzuki’s best-selling models—will be the focal points of these stores. To enhance the consumer experience, digital interfaces and virtual reality equipment will be implemented in the showrooms. This would allow potential buyers to realistically investigate several car models, features, and personalisation options.

For customers in smaller areas, the opening of Arena Satellite showrooms offers a number of benefits. Its main purpose is to make Maruti’s range of vehicles and services easier to access, which in turn brings the brand closer to the customer. Buyers may now visit a nearby satellite showroom to get more information about the products, schedule a test drive, and make an informed decision without having to travel far to the nearest store.

By employing this tactic, Maruti Suzuki may be able to reduce the costs associated with establishing and running large dealerships. Additionally, it makes the business more adaptable and sensitive to the needs of the regional market. Maruti can maintain its position as a big player in smaller markets without having to make significant expenditures by using digital technology to reduce expenses. Moreover, it is expected that Maruti’s consumer engagement and brand loyalty will increase with the opening of the satellite stores. By providing a seamless and personalised experience, Maruti seeks to build long-lasting relationships with its customers, which are crucial for repeat business and brand advocacy.

A major component of the Arena Satellite showroom idea is digital transformation. With the help of Digitalization and Advance Technologies these showrooms will be able to provide customers a better & Modern Experience. For example, customers may use interactive displays to compare different models, customise their cars, and even go on virtual test drives. Younger consumers find this digital-first strategy especially appealing since they are more tech-savvy than older customers and they appreciate innovation and convenience. Furthermore, given that consumers seek for online and digital connection throughout the whole car-buying process, it aligns with the broader trend of digitalisation in the automotive industry.

Maruti Suzuki’s strategy to expand into semi-urban and small town markets might eventually set a new benchmark for the car retail sector. Should it show to be successful, more manufacturers may decide to adopt it, which would transform the Indian car retailing landscape. The Arena Satellite showrooms demonstrate Maruti’s commitment to innovation and customer-centricity, as well as the company’s adaptability in adapting to changing market conditions.

To summarise, Maruti Suzuki’s strategic and audacious choice to establish Arena Satellite stores is aimed at capitalising on the growing demand in India’s smaller cities and suburbs. The firm is in a solid position to maintain its market leadership and continue on its present growth trajectory because of its focus on these expanding sectors. As the Indian automotive market evolves, Maruti’s innovative approach may impart valuable knowledge to other industry players by emphasising the need of being accessible and well-versed in client needs.

The image added is for representation purposes only

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Hyundai Q3 FY2025 Sees 19% Profit Drop Amid Lower Sales and Rising Costs
Business, Equities, Market News, Markets - September 13, 2024

Hyundai Targets Revival with New SUVs and India-Made EV by 2025

Hyundai Targets Revival with New SUVs and India-Made EV by 2025

Hyundai Motor, once the dominant foreign automaker in India, is determined to regain its lost ground in the country’s rapidly evolving automotive landscape. The South Korean giant is embarking on an ambitious product offensive, backed by a planned $3 billion public listing of its Indian subsidiary, to fend off increasingly formidable domestic rivals.

The company’s strategy revolves around a multi-pronged approach that aims to address the shifting consumer preferences and intensifying competition in the world’s third-largest car market.

At the heart of Hyundai’s revival plan is a promise to introduce a slew of new SUV models, including its first India-made electric vehicle (EV) early next year, followed by at least two additional gasoline-powered SUVs by 2026. This product onslaught is part of the company’s broader efforts to strengthen its presence in the high-margin SUV segment, which has become the hottest-selling vehicle category in India, displacing the once-favored small cars.

Hyundai’s market share in India has been on a gradual decline, dropping from 17.5% four years ago to 14.6% currently, as domestic giants like Tata Motors and Mahindra & Mahindra have gained ground with their own range of SUV offerings. Meanwhile, Toyota, another major foreign rival, has also seen its share rise to 6% from 4% over the same period.

V G Ramakrishnan, a management expert, acknowledged Hyundai’s challenging position in the Indian market. He noted that the company’s primary focus should be on retaining its market share, and the only way to achieve this is through a faster rollout of new products.

To address this challenge, Hyundai has outlined an ambitious product pipeline that includes not just the introduction of new SUVs, but also a strategic shift towards higher-margin offerings. The company’s plan to list its Indian subsidiary on the local stock exchanges, seeking to raise $3 billion, underscores its bullish outlook on the country’s automotive market.

In April, during his visit to India, Euisun Chung, the Executive Chair of Hyundai Motor Group, expressed the company’s pride in consistently securing the second-largest market share in the country’s dynamic automotive landscape.

The introduction of Hyundai’s first India-made EV in 2025 will be followed by four more EV models by the end of the decade, as the company evaluates plans to establish the country as a regional EV export hub. This move aligns with Hyundai’s broader strategy to boost its global sales by 30% by 2030, with a focus on higher-priced, premium vehicles.

In the gasoline-powered segment, Hyundai’s upcoming launches include a crossover model based on its Bayon offering sold in global markets, competing against Maruti’s Fronx crossover and Tata’s Nexon SUV. The second gasoline-powered SUV is expected to be larger than the popular Creta model and will likely compete with Mahindra’s XUV700.

The new SUV models are expected to contribute around 120,000 additional units per year to Hyundai’s sales in India, further reinforcing the company’s position in the market.

However, Hyundai’s rivals are also not standing still. Tata Motors, the country’s top-selling EV maker with a market share of over 75%, has announced plans to launch five more EVs over the next three to four years, taking its total EV portfolio to 10. Mahindra, another prominent domestic player, has plans to introduce seven electric SUVs and six new gasoline-powered SUVs by the end of the decade.

An Indian supplier to Hyundai cautioned that the strategies that have worked for the company in the past may not be sufficient to secure its future success. The Indian supplier to Hyundai cautioned that the strategies that have worked for the company in the past may not be sufficient to secure its future success. An Indian supplier to Hyundai cautioned that the strategies that have worked for the company in the past may not be sufficient for its future success.

Regaining its lost ground will require Hyundai to strike a delicate balance between market share and profitability. The company’s “premiumization” strategy, which has helped it record some of the highest profit margins among its peers in India, has come at the cost of sales volumes.

As Hyundai prepares for its public listing, the company will need to strike a careful balance between its focus on higher-margin offerings and maintaining its market share. “If there is a drop in either sales or profits, the company can be questioned by shareholders,” cautioned management expert V.G. Ramakrishnan.

Hyundai’s journey in India has been a rollercoaster ride. From its early success with affordable hatchbacks like the Santro to its recent dominance in the SUV segment, the company has navigated the challenges of this dynamic market. Now, as it embarks on a new phase of growth, Hyundai faces the crucial task of reclaiming its position as the leading foreign automaker in India, while also satisfying the demands of its future public shareholders.

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