High-tech vehicles offer India a path to global success

India has a multi-billion dollar opportunity for the localization of components in the next 5 years, a large chunk of it in the EV space. Photo: Mint
India has a multi-billion dollar opportunity for the localization of components in the next 5 years, a large chunk of it in the EV space. Photo: Mint


The global automotive sector has shifted gears quickly in the last decade and dramatically during the covid pandemic.

The global automotive sector has shifted gears quickly in the last decade and dramatically during the covid pandemic. Rapid digitization and electrification, with a sharp focus on efficiency, are bringing the future of mobility closer. The world has seen remarkable technological advancements and substantial sales, trends that are particularly prominent in India, where an electric shift has prompted structural changes in its automotive industry. As a young country, India has talent and workforce agility, making it easy for manufacturers to build new capacities and scale up, and remains attractive to global players.

India is the world’s largest manufacturer of tractors and two-wheelers, the second-largest bus maker and third-largest producer of heavy trucks. Passenger and commercial vehicle sales have risen in strong double-digits, showing resilience amid several geopolitical and supply-chain constraints, and the segment of two-wheelers is expected to make large gains by 2030. Original equipment manufacturers (OEMs) also reported a strong boost in growth during the recent festive season.

The EV disruption: India has set itself a clear path to move beyond conventional internal combustion engine (ICE) vehicles to electric vehicles (EVs). The Indian EV segment is expected to expand at a compound annual growth rate of 36% and become the world’s third largest by 2030. For two- and three-wheelers (E2Ws and E3Ws), the total cost of EV ownership is increasingly becoming attractive. According to a recent Automotive Component Manufacturers Association of India-McKinsey report, sales of new E2Ws and E3Ws could grow to 50% and 70% of segment sales, respectively, by 2030. ICE vehicles will continue to dominate the passenger and heavy commercial vehicle landscape, given their slower electrification rate.

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The government has an incentive support system in place to promote EVs. This includes a roadmap for the development of future technologies with deep localization for exports. India has a multi-billion dollar opportunity for the localization of components in the next 5 years, a large chunk of it in the EV space. Significant shifts in global value pools towards downstream services are expected to follow increased EV adoption. Some of these, such as vehicle connectivity services, are in synchrony with India’s strengths like software development and applied engineering. With lower-cost services factored in, India is well positioned to go for global competitiveness.

Local capacities for global opportunities: OEMs in India are expanding their capacity to cater to global demand. This is an opportunity to generate $35-50 billion by 2030 as manufacturers seek supply-chain resilience by diversifying their sources. Indian companies can capture opportunities in categories like forgings, castings, gearbox parts, etc. EV disruption in the US and Europe markets offer opportunities too.

Support from academia and the government: Our automotive industry has got proactive support from the government and academia to achieve tech innovations. Recently, a Centre of Excellence at the IIT-Delhi campus in Sonepat was established in association with ACMA that will focus on specified need areas.

Government policies like the Faster Adoption and Manufacturing of EVs ( FAME-II) scheme and the selection of auto components makers for its Production Linked Incentive (PLI) scheme have been of support. Incentives for the industry and FAME-II, with an outlay of $8 billion, are enabling India to become a major source of high-end components. It will help to have targeted incentives for big businesses with the potential to become global players.

Network-connected and autonomous vehicles: While India still has a lot to catch up on when it comes to web-connected and autonomous vehicles, a conversation has already been initiated among industry players on the way forward. Today’s increased use of connected cars is being aided by rising demand for comfort and safety features. By 2025, it is anticipated that India’s penetration of connectivity will be around 40%, while more than 70% of cars globally will be connected, with one in four having 5G telecom connectivity. All ecosystem participants—including OEMs, Tier-1 suppliers, regulatory bodies, system integrators and service providers—must work together for a successful transition. The emergence of Industry 4.0 technologies like artificial intelligence (AI) and data analytics has made this concept a reality, with 5G expediting the transition. Yet, the industry needs to address serious concerns of cyber and data threats. The Indian government is also developing standards for the security of connected vehicles. Stepping into the domain of such internet-linked vehicles will, with all its challenges, be an interesting phase for the Indian automotive industry.

India is at a vantage point to make the most of new opportunities presented by electrification and the headwinds brought on by a global demand-supply mismatch. OEMs are greatly benefitting from efforts to strategically dedicate management bandwidth and resources to secure emerging global opportunities. The country has set out an impressive roadmap for a thriving ecosystem to support the future of mobility. Considering all that’s already in motion and our industrial capabilities, India is placed well to benefit from the changing global landscape of mobility and will have a significant role to play in defining its future.

Sunjay Kapur is president, Automotive Component Manufacturers Association of India and chairman, Sona Comstar.

Elsewhere in Mint

In Opinion, Sunil Duggal tells how to grow India's mineral-intensive new-age economy. Sunjay Kapur says India is well-placed to gain from shifting mobility landscape. Tim Culpan brings positive news from one of the worst years for tech sector. Long Story reveals how telehealth firms are flooding TikTok and Instagram with misleading ads.

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