Key Factors Shaping India’s Auto Industry Growth  

The automobile industry in India plays a pivotal role in the country’s economy by providing affordable mobility solutions, creating jobs and enhancing India’s reputation internationally. 

Accounting for approximately 7% of the country’s GDP, the industry employs more than 4 million people directly and around 27 million people indirectly. 

India has solidified its position as 2nd largest in two-wheeler manufacturers globally, the 6th largest in passenger vehicle production, and 7th largest in commercial vehicle manufacturing. 

This growth can be attributed to rising income levels, a favorable employment landscape and initiatives taken by the government. Rapid urbanization further fuels the industry, with an estimated 60 % of Indians expected to reside in metro-cities by 2050.   

Additionally, the government’s focus on adopting global standards in emissions, safety, manufacturing practices, and the exploration of alternative fuels are marking a progressive step toward sustainable and environmentally conscious practices in the Indian automobile sector.  

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Accelerating EASY and Growth In Digital Sales

“It took us seven decades to reach 4 million cars, and the number is poised to increase to seven million in the next six years, welcome to the age of radical change in the automotive industry.” 

– Rakesh T Arora, Head, After Market Sales – Lumax World 

Welcome to an era of unprecedented transformation in the automotive industry, where change occurs at an amazing pace. The no.of vehicles sold will skyrocket from 4 million to 7 million by 2030. However, this rapid evolution poses a significant challenge for Original Equipment Manufacturers (OEMs) that are trying to meet the rising demands of the Indian market.  

The acceleration in the automotive industry is aptly captured by the acronym EASY: 

1. Electrification

The focus on electrification in the automotive industry involves key initiatives such as the development of charging infrastructure to support electric vehicles (EVs), advancements in electric vehicle technology, and efforts to create demand for electric vehicles among consumers.  

This shift towards electrification is aimed at reducing environmental impact and promoting sustainable transportation.

2. Autonomous capabilities

Autonomous Driving Assistance Systems (ADAS) technologies are being developed to assist drivers and enhance overall safety on the roads. 
These include features like lane-keeping assistance, automatic emergency braking, and adaptive cruise control.  
The ADAS market is experiencing significant growth, projected to grow at a compound annual growth rate (CAGR) of approximately 18.80% from 2023 to 2032, reaching around USD 9.98 billion.

This substantial growth reflects the increasing adoption of ADAS technologies as they become integral to ensuring safer and more efficient driving experiences. 

3. Shared mobility

The concept of shared mobility focuses on providing transportation services that are more cost-effective on a per-kilometer basis compared to traditional modes of transport such as three-wheelers and private automobiles.  
Shared mobility options like ride-sharing and carpooling are gaining popularity as they offer a more economical and efficient alternative for commuters. 

4. Yearly updated

The automotive industry continuously evolves by incorporating new features and technologies into vehicles.  
Annual updates introduce innovations such as artificial intelligence (AI), advanced driver assistance systems (ADAS), and machine learning capabilities that enable cars to adapt and learn user preferences.  
This commitment to regular updates ensures that vehicles stay technologically relevant and meet the changing needs of consumers. 

As the industry transforms, consumer buying behavior undergoes a parallel transformation. While the Passenger Vehicle (PV) segment flourishes, 2-wheeler sales face challenges, and Electric Vehicle (EV) penetration in PV is around 2%, poised to grow to 5%. Conversely, the 2-wheeler EV market shows promising penetration. 

Digital sales also have surged post-COVID, witnessing robust growth in both backend and forward integration. Customers increasingly seek information online, booking test drives through websites and relying on diverse sources such as blogs, media, auto magazines, and YouTube for informed decision-making.  

This digital shift extends to the company side as well, where tech manages dealership inventories, customer interactions, and service reminders. 

Strategies, Advantages and Challenges for Electric Vehicles in India

Electric vehicles are dominating conversations, with companies heavily investing in their development. Despite low EV penetration, investment remains robust, driven by various EV segments.  

China has achieved a 30% penetration of electric vehicles (EVs), while India trails behind at 2%, primarily attributed to infrastructure challenges, particularly in the charging ecosystem.  

Both the government and OEMs are tackling this challenge through strategic investments, focusing on both charging infrastructure and vehicle development.  

Owing an EV has advantages, such as minimal operating expenses, good resale value, zero tailpipe emissions, and smooth, quiet driving experience. Government initiatives like FAME-2 allocated 10% of the total budget to enhance charging infrastructure, aiming to accelerate EV adoption.  

However, for a faster adoption of EVs in the market, the government must slash down the import duty on the components required and provide incentives to manufacturers.  

Beyond economic considerations, the environmental impact is a driving force. With 35 of the 50 most polluted cities globally located in India, reducing transport-related emissions is crucial.  

Companies see EV production as a step forward for aligning with customer and government expectations.  

The major players in the car world are not just adapting to this change; they are making it happen. They are putting more than 30% of their profits into figuring out how to make electric cars (EVs) better. This is important for the future of the car industry.”  

– Bheemshah LT – Regional Head Sales – Mahindra

Rise of Advanced Autonomous Driving Systems (ADAS) 

The Indian Advanced Driving Assistance system (ADAS) market is poised to grow significantly, and the sector has the potential to reach $9.98 billion by 2032.  

The primary reason for this growth is the demand for passenger vehicles.  Customers expect vehicles to adapt to their preferences like music, ambiance and automatic seat adjustments, creating a surge in the adoption of ADAS technologies.  

Furthermore, the Indian government’s efforts to enhance road safety are a crucial component in the growth of ADAS components.  

Additionally, the potential in the market motivated international firms to invest and collaborate with local entities. Global companies have recognized India’s potential to scale in the local market.  

However, the road to full autonomy in India faces challenges due to public’s negligence on traffic rules and regulations. While partial autonomous vehicles are gaining traction, achieving full autonomy remains a challenge for the next decade.

Shared Mobility Service And Their Impact On Auto Industry 

There is a shift being witnessed from ownership to usership, with share mobility gaining increased traction, particularly post-covid. This transformation not only aligns with changing customer preferences but also has economic advantages by reducing costs associated with individual ownership.  

Subscription models have emerged as a viable alternative, consolidating demand and providing users with flexible and cost-effective options.  

Major ride-hailing companies such as Ola and Uber have established dedicated workshops where component manufacturers can directly supply, capitalizing on the economies of scale. This trend is seen as an opportunity for the component manufacturers.  

In this dynamic landscape, shared mobility stands responding to evolving preferences and a strategic opportunity for the component manufacturers.

Expanding Pre-owned Car Market on New Vehicle Demand and Automaker Strategies 

As the purchasing power is increasing, there is a noticeable trend of frequent vehicle changes among consumers. This shift is attributed to an evolving customer mindset, seeking vehicles that offer solutions to all their needs.  

Also, to adapt to the pre-owned market, companies have established their own organizations that not only facilitate sales but also provide warranties for used vehicles. While cities witness a surge in demand for new vehicles, tiers 2 and 3 exhibit a preference for pre-owned vehicles.  

This rise in demand can also be attributed to increased road connectivity and accessible car financing options.  

OEMs have realized this and are developing their dealership network, which provides financing options, and companies are certifying used cars before selling to instill trust in the customers.  

How CRM Will Transform the Automotive Industry 

A CRM (Customer Relationship Management) is poised to revolutionize the automotive industry by improving how companies engage with their customers. This involves a comprehensive approach to understanding, communicating, and addressing customer needs and preferences. Here’s how: 

  1. Better Customer Understanding: CRM allows car companies to understand customer needs and preferences. This means offering vehicles and services that align more closely with what people want. 
  1. Efficient Communication: With CRM, communication becomes smoother. Car businesses can keep customers informed about new models, services, and promotions, building a stronger connection. 
  1. Streamlined Sales Process: CRM simplifies the sales process. From managing leads to closing deals, it helps organize and track every step, ensuring a more efficient and effective sales journey. 
  1. Post-Sale Support: After a purchase, CRM continues to play a role. It helps in providing better post-sale support, addressing concerns, and maintaining a positive relationship with customers. 
  1. Data-Driven Decisions: CRM relies on data, allowing businesses to make informed decisions. By analyzing customer trends and behaviors, car companies can adapt strategies for continuous improvement. 
  1. Enhanced Customer Loyalty: With improved communication, understanding, and support, CRM contributes to building customer loyalty. Satisfied customers are more likely to return for future purchases and recommend the brand to others. 

In essence, CRM is a powerful tool that not only transforms how car businesses operate but also ensures a more customer-centric and efficient automotive industry. 

As the automotive industry evolves globally, LeadSquared stands ready to empower your business with advanced solutions. Embrace technology and eco-friendly practices for sustained growth.  

Join the ongoing story of India’s automotive success with LeadSquared – your key to navigating the future. 

Navigating the Road Ahead 

In summary, the success of India’s car sales in 2023 is influenced by several factors, including the growing middle class and preferences in vehicle features.  

Looking forward, India’s automotive industry actively contributes to the global narrative of transportation evolution. Transitioning from historical perspectives to becoming a significant global player reflects the resilience and ingenuity of the car industry.  

Despite potential surprises ahead, maintaining a focus on technology, eco-friendliness, and industry leadership will sustain India’s car business. The ongoing story of India’s car success signifies continuous improvement and adaptation, ultimately shaping how people navigate the world. 

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