Role of Automobile Industry in Indian Economy

The Role of Automobile Industry in India GDP has been phenomenon. The Automobile Industry is one of the fastest growing sectors in India.
The increase in the demand for cars, and other vehicles, powered by the increase in the income is the primary growth driver of the automobile industry in India. The introduction of tailor made finance schemes, easy repayment schemes has also helped the growth of the automobile sector.

Indian market before independence was seen as a market for imported vehicles while assembling of cars manufactured by General Motors and other brands was the order of the day. Indian automobile industry mainly focused on servicing, dealership, financing and maintenance of vehicles. Later only after a decade from independence manufacturing started. India’s Transportation requirements were met by Indian Railways playing an important role till the 1950’s. Since independence the Indian automobile industry faced several challenges and road blocks like manufacturing capability was restricted by the rule of license and could not be increased but still it lead to growth and success it has achieved today.

The Indian Automobile industry includes two-wheelers, trucks, cars, buses and three-wheelers which play a crucial role in growth of the Indian economy. India has emerged as Asia’s fourth largest exporter of automobiles, behind Japan, South Korea and Thailand. The country is expected to top the world in car volumes with approximately 611 million vehicles on the nation’s roads by 2050.The Economic progress of this industry is indicated by the amount of goods and services produced which give the capacity for transportation and boost the sale of vehicles. There is a huge increase in automobile production with a catalyst effect by indirectly increasing the demand for a number of raw materials like steel, rubber, plastics, glass, paint, electronics and services.

Role of Automobile Industry in India GDP-Facts

  • India has become one of the international players in the automobile market
  • In the year 2006-07, the Indian Automobile Industry produced 2.06 million four wheelers and 9 million two and three wheelers
  • The four wheelers include passenger cars, multi-utility vehicles, sports utility vehicles, light, medium and heavy commercial vehicles, etc
  • The three wheelers include mopeds, motor-cycles, scooters, and three wheelers
  • India ranks 2nd in the global two-wheeler market
  • India is the 4th biggest commercial vehicle market in the world
  • India ranks 11th in the international passenger car market
  • India ranks 5th pertaining to the number of bus and truck sold in the world
  • It is expected that the Automobile Industry in India would be the 7th largest automobile market within the year 2016

Role of Automobile Industry in India GDP-Sales Trends

  • In the year 2006-07 the number of Passenger Car sold were 10,76,408
  • In the year 2006-07 the number of Passenger Vehicles sold were 13,79,698
  • In the year 2006-07 the number of Commercial Vehicles sold were 4,67,882
  • In the year 2006-07 the number of Three Wheelers sold were 4,03,909
  • In the year 2006-07 the number of Two Wheelers sold were 78,57,548
  • In the year 2006-07 the number of automobile sold were 1,01,09,037

Role of Automobile Industry in Indian Economy

Role of Automobile Industry in India GDP-Growth

  • The growth rate of the Passenger Cars in the year 2007 is 13.50%
  • The growth rate of the Utility Vehicles in the year 2007 is 10.10%
  • The growth rate of the Multi Purpose Vehicles in the year 2007 is 24.40%
  • The growth rate of the Light Commercial Vehicles in the year 2007 is 16.05%
  • The growth rate of the Commercial Vehicles in the year 2007 is 3.43%
  • The Maruti Udyog Ltd is the largest car manufacturer in the country and the rate of growth in the year 2007 was 20.7%
  • The Mahindra & Mahindra Ltd’s cumulative sales for the year 2007 was 1,06,094 units and the rate of growth was 35.8%
  • The Honda Siel Cars India Ltd, the leaders in India pertaining to the manufacturing of premium cars, registered a growth of 16.1 % during the year 2007 and sold 41,638 units
  • The Daimler Chrysler sales for the year 2007 was 1,681 units in India and the growth rate was more than 22%
  • The General Motors India, registered a 114% increase in the national sales in the August of 2007
  • The Hero Honda sold more than 2 million units in the Jan-Aug period of the year 2007
  • The export pertaining to the motorbikes was 3,21,321 units in the year 2007
  • It is estimated that in the year 2007-08 the motorcycle sales would be 7 million, the car sales would be 1.55 million, and the two-wheelers sales would be 8.3 million

Automobile Industry in India-New Models

  • Maruti sedan SX4 and Zen Estilo
  • Mahindra Renault Logan,
  • General Motors Chevrolet Spark, Aveo, and Aveo UV-A
  • Hyundai Verna
  • Fiat Palio 1.1 litre version,
  • Volvo Car S80 sedan and XC90 SUV,
  • Tata Motors Magic and Winger,
  • Volkswagen Passat
  • Mitsubishi Cedia
  • General Motors India
  • Eicher Motors
  • Bajaj Auto
  • Daewoo Motors India
  • Hero Motors
  • Hindustan Motors
  • Royal Enfield Motors
  • Telco
  • TVS Motors
  • DC Designs
  • Swaraj Mazda Ltd

Role of Automobile Industry in India GDP-Foreign Investments

  • The Indian Automobile industry is at present engaged in mergers and acquisitions on the international scale
  • The Indian automobile industry’s foreign sector worth US$ 515 million
  • The Mahindra and Mahindra company will be establishing a utility assembly plant in collaboration with Bramont, a local company at Manuas, in North Brazil
  • In Egypt, the Mahindra and Mahindra company has set up assembly plants in collaboration with the Bavarian Motors
  • The Tata Motors have entered the passenger car market in Saudi Arabia with the launch of
  • Tata Indigo, Tata Indica, and Tata Indigo Marina
  • The TVS Motor Company has established a two-wheeler manufacturing unit at Karawang, in Indonesia
  • The Maruti Udyog Ltd has captured nearly 60% of the small car market in Indonesia
  • The Nissan Motor facility in South Africa was acquired by the Tata Motors to manufacture Tata vehicle for European and South African market
  • The Jaguar and Land Rover companies owned by the Ford Motor Company was acquired by the Tata Motors Ltd for estimated price of US$ 1.5 billion


The development story of the Indian automobile industry cannot be complete without mentioning the Pioneer Mr. J.R.D Tata’s role in setting up the Tata group with high standard Engineering Research Centre (ERC) in 1965 to facilitate technological advancement. Pioneering the indigenization of scientific knowledge for trucks in collaboration with Mercedes Benze and launched Maruti 800 in the year 1983 which changed the dynamics of the passenger car sector in India. It was also known as the people’s car. 60% of the Indian commercial vehicle market is dominated by Tata Motors.

  • The first automobile was launched in India in the year 1897 in Bombay.
  • Today India is being recognized as a potential emerging auto market.
  • The industry adds up foreign players to their investments.
  • 80% of the segment size is contributed by two-wheelers & motorcycles.
  • Indian passenger vehicle market is dominated by cars (79%) unlike the USA.
  • India is the largest three-wheeler & two-wheeler market in the world. It is second largest tractor manufacturer in the world, fifth largest commercial vehicle manufacturer in the world.
  • India crossed the 1 million mark as the fourth largest car market in Asia recently.
  • The industry is expected to grow to US$ 40 billion by 2015 from the current level of US$ 7 billion in 2008. By the year 2016 the industry is expected to contribute 10% of the nation’s GDP.
  • Very recently history has been created in the world of Automobile Industry by Ratan Tata, Chairman (Tata Motors) by launching the world’s cheapest car NANO. The price of the car was around one lakh which gained instant recognition in the automobile industry across the globe. It heralded the coming to age of the Indian Automobile Industry.

India is the second Largest Producer of Motorcycles in the world (5.2 Mln) after China which has a production volume of 12 Mln.