Auto & Transportation

The two main goals of India’s series of policy support in the automotive sector are to achieve localized automotive manufacturing and further adaptation to future electrification. For the Indian government, automobile manufacturing is the core of "Made in India" and the key to increasing the output value of Indian manufacturing to 25% of GDP.

Xinhua Finance, Mumbai, August 30 (Reporter Zhang Yadong) In recent times, the Indian government has continuously strengthened its policy support in the field of automobile manufacturing, from the stimulus plan on the production and supply side to the lowering of the tax rate on the consumer demand side. Industry insiders pointed out that the two main goals of India’s series of policy support in the automotive sector are to achieve localized automotive manufacturing and to further adapt to future electrification. For the Indian government, automobile manufacturing is the core of "Made in India" and the key to increasing the output value of Indian manufacturing to 25% of GDP.

India series car manufacturing support policy

In the field of production and supply, India's auto production incentive plan (PLI) with a total value of 570 billion rupees is about to be introduced. India’s Minister of Heavy Industry, Mahendra Nath Pandey, said on the 26th that the production incentive plan (PLI) for the automotive sector, totaling 570 billion rupees, has entered the final stage of approval and will be introduced soon. This plan will help India's car exports and India's overall manufacturing industry.

Automobile manufacturing has been the key to India's boost to high-end manufacturing, and it is also the focus of the development of India's manufacturing industry. The Indian government said last year that it would promote the Manufacturing Promotion Plan (PLI) in 10 manufacturing sectors in the next five years, with a total funding plan of Rs 2 trillion. In the stimulus plan of 2 trillion rupees in the 10 major manufacturing sectors, investment incentives in the automotive sector alone amounted to 5704.2 billion rupees, accounting for more than 25%. Together with the investment incentives of Rs. 63.22 billion in special steels related to automobile production, it accounts for 32% of the total incentive plan. This shows the importance of relevant Indian departments on automobile manufacturing.

In the area of consumer demand, in response to automakers’ calls for excessive auto consumption taxes that are not conducive to the growth of domestic auto consumption, Tarun Bajaj, head of the Indian Taxation Bureau, said that India is willing to discuss changes in auto tax rates and the reduction proposed by automakers. Tax requirements are open.

India’s Goods and Services Tax (GST) tax rate on motor vehicles is as high as 28%. Together with other taxes levied by various states, the relevant taxes and fees for Indian consumers account for 37% to 38% of the cost of car purchase. This caused strong dissatisfaction among Indian automakers and attributed the downturn in the Indian auto industry over the past two years to this. At the 61st Annual Meeting of the Association of Indian Automobile Manufacturers (SIAM) held a few days ago, RC Bhargava, chairman of Maruti Suzuki, the largest car manufacturer in India, pointed out that the GST rate for car-related goods and services in India is almost the same. Twice as much as the European Union, Japan or the United States. But the income of Indian residents is lower, and for most Indians, buying a car is a heavy burden.

In addition, in order to introduce Tesla into production in India, relevant Indian authorities have hinted that they may reduce import tariffs on electric vehicles. The Indian government's eagerness in the automotive sector can be seen.

Two major goals of Indian cars: localization and electrification

Regarding the future development of Indian cars, industry insiders pointed out that localized manufacturing including parts and components and electrification to meet future needs are the two main goals at this stage.

The global supply chain disorder caused by the epidemic has severely affected India's automobile manufacturing industry. Amitabh Kant, CEO of India’s National Transformation Research Council, a representative of the Indian government’s think tank, said that the Indian auto and parts industry must eliminate its dependence on imports from overseas markets, including China, and achieve localization of such products. change. "A series of widespread supply disruptions, such as global supply chain rebalancing, government incentives to increase exports, and technology blockades in related countries, are creating opportunities for all levels of the Indian automotive value chain. India must see this as an opportunity. Let the industry participate Participants actively participate to realize the localization of Made in India."

The semiconductor shortage is also affecting India's automobile manufacturing industry, and it is also one of the focal points for the localization of Indian auto parts. Ayukawa, CEO of Maruti Suzuki, pointed out that although semiconductor shortages seem to be a challenge, it also presents opportunities for India. Semiconductor manufacturing requires a very large investment, and the Indian automotive industry alone cannot guarantee that investment in semiconductor projects is completely feasible. Therefore, cross-departmental integration is required.

According to data released by the Indian Auto Parts Manufacturers Association, India imported approximately US$4.2 billion in auto parts in 2019, and China is one of its sources of imports. Deepak Jain, president of the Indian Auto Parts Manufacturers Association in India, pointed out that increasing investment in this area can reduce dependence on the international market and encourage the industry to become a net exporter.

Facing the future, realizing the electrification of automobiles is also the development goal of the Indian automobile industry. Conte pointed out that the transition of the auto industry to electrification will be an inevitable trend. India should learn from the lessons of solar energy development and cannot become a major importer of electric vehicle accessories.

Although India has provided policy incentives for the development of electric vehicles, so far, the development of electric vehicles in India has been lacklustre. The Indian market currently has a severely insufficient demand for electric vehicles. Due to the serious shortage of infrastructure such as charging and the high price of electric vehicles, the share of electric vehicles in Indian car sales is negligible. According to data from the Indian Electric Vehicle Manufacturers Association, the sales of electric vehicles in India reached 156,000 in the 2019-20 fiscal year, an increase of 20% compared with the previous fiscal year. Among them, 152,000 are electric two-wheelers, 3,400 are electric vehicles, and 600 are electric buses.

Indian cars are the key to achieving 25% of GDP in manufacturing

From a more macro perspective, India’s current focus on the development of automobile manufacturing is to use this as a fulcrum to promote the proportion of Indian manufacturing in the domestic economy to 25%.

Modi put forward the slogan "Made in India" when he first took office as Prime Minister of India in 2014, but time has passed and the "Made in India" strategy has not achieved significant results. For the manufacturing industry, India hopes to increase its proportion in the national economy to 25%, but so far, this proportion is still around 17%, which can be said to be little progress.

India is now pinning its hopes of achieving this goal on car manufacturing. Mahendra Nath Pandey said that the Indian government can increase the proportion of manufacturing in India’s GDP to 25% by 2022 through policies such as “Made in India” and Industry 4.0. He pointed out that through the implementation of the auto production incentive plan, India aims to double auto exports to 30 billion U.S. dollars in the next five years, and expand the number of employees in the auto industry from the current 5 million to 7.5 million.

Source: Xinhua Finance. Original title: "India supports the development of autos, the warm wind blows the direction of localized electrification."