• Sixth largest producer in the world with an average annual production of 24 million vehicles in 2016.
  • India has the fifth largest passenger vehicle and commercial vehicle market
  • Presence of four large auto manufacturing hubs across the country: Delhi-Gurgaon-Faridabad in the North, Mumbai-Pune-Nashik-Aurangabad in the West, Chennai- Bengaluru-Hosur in the South and Jamshedpur-Kolkata in the East.
  • Contributes to 7.1% of India’s Gross Domestic Product (GDP) by volume.
  • Six million-plus hybrid and electric vehicles to be sold annually by 2020.
  • Two-wheeler production has grown from 8.5 million units annually to 15.9 million units in the last seven years.
  • Domestic Market Share: 2015-16
    1. Passenger Vehicles: 14%
    2. Commercial Vehicles: 3%
    3. Three-wheelers: 3%
    4. Two-wheelers: 80%
  • India has the world’s 12th largest number of high-net-worth individuals, with a growth of 20.8%, the highest among the top 12 countries.


100% Foreign Direct investment (FDI) is allowed under the automatic route in the auto sector, subject to all the applicable regulations and laws.


Auto Policy

  • Automatic approval for foreign equity investment up to 100% with no minimum investment criteria.
  • Manufacturing and imports in this sector are exempt from licensing and approvals.
  • The encouragement of R&D by offering rebates on R&D expenditure.

Automotive Mission Plan 2016-26:

Salient points of AMP-2026 are:

  • The Indian Automotive industry is to be a top job creator – 65 million additional jobs
  • The Indian Automotive industry is to be one of the prime movers of manufacturing sector and “Make in India” initiative
  • The Indian Automotive industry aims to increase exports of vehicles by 5 times, and components by 7.5 times
  • Specific interventions are envisaged to sustain and improve manufacturing competitiveness and to address challenges of environment and safety

National Automotive Testing And R&D Infrastructure Project (NATRiP):

  • The project has been set up at a total cost of USD 585 million to enable the industry to adopt and implement global performance standards.
  • Focus on providing low-cost manufacturing and product development solutions.

The National Electric Mobility Mission Plan 2020 (NEMMP):

  • The objective of this body is to encourage reliable, affordable and efficient xEVs (hybrid and electric vehicles) that meet consumer performance and price expectations through government-industry collaboration
  • Promotion and development of indigenous manufacturing capabilities, required infrastructure, consumer awareness and technology are additional objectives of NEMMP 2020.
  • India is to emerge as a leader in the two-wheeler and four-wheeler xEV market in the world by 2020, with total xEV sales of 6-7 million units thus enabling the Indian automotive industry to achieve global xEV manufacturing leadership and contributing towards national fuel security.
  • Target of putting 6 million electric and hybrid vehicles per year on the road by 2020 under NEMMP 2020.
  • A pilot scheme for the initial period of two years in the name of Faster Adoption & Manufacturing Of Hybrid And Electric Vehicles, implemented from 1st April 2015 for the initial period of two years.
    1. It will cover all vehicle segments i.e. two-,three- and four-wheelers, cars, LCVs, buses etc. and all forms of hybrid (Mild/Strong/Plug-in) and pure electric vehicles.
    2. It also seeks to provide demand incentives to electric and hybrid vehicles from two-wheeler to buses.

Pilot Electric Vehicle Projects:

  • The Department of Heavy Industry(DHI) is launching pilot projects on electric vehicles in various metros and cities all across the country under the NEMMP 2020 with a dual purpose – demonstrating and disseminating the benefits of adopting cleaner, greener modes of transportation as also to explore the viable operational modalities.
  • The DHI will provide viability gap funding through subvention to support the extra cost of acquisition and operation of these vehicles by state governments or designated bodies.
  • In the first phase, a pilot project to provide last mile connectivity through to electric passenger vehicles will be promoted.
  • All the other states have been brought on board and different states have already appointed nodal officers to co-ordinate with DHI and vehicle manufacturers for the implementation of those pilot projects.
  • The uptake of electric vehicles will depend in large part on the adequate deployment of Electric Vehicle Supply Equipment (EVSE) needed to recharge electric vehicles.


R&D Incentives:

Industry/private sponsored research programs:

  • A weighted tax deduction is given under section 35 (2M) of the Income Tax Act. A weighted deduction of 150% is granted to assess any sums paid to a national laboratory, university or institute of technology, or specified persons with a specific direction, provided that the said sum is used for scientific research within a program approved by the prescribed authority.

Companies engaged in the manufacture of an in-house R&D centre:

  • A weighted tax deduction of 150% under section 35 (2AB) of the Income Tax Act for both capital and revenue expenditure incurred on scientific research and development (Expenditure on land and buildings are not eligible for deduction).
  • Concessional excise duty of 6% has been extended without any sunset clause in the Union Budget 2015-16 for manufacturers of batteries supplying to producers of electrically operated vehicles.
  • Exemption from Basic Custom Duty (BCD) on lithium ion automotive batteries for the manufacture of lithium ion battery packs for supply to manufacturers of hybrid and electric vehicles.

State Incentives:

  • Beside the above, each state in India offers additional incentives for industrial projects. Incentives are in areas like rebates in land cost, relaxation in stamp duty exemption on sale or lease of land, power tariff incentives, a concessional rate of interest on loans, investment subsidies/tax incentives, backward areas subsidies, special incentive packages for mega projects.

Export Incentives:

  • Support to major markets has been given to the auto components and automobiles sectors under the new “Merchandise Exports from India Scheme” (MEIS).

Area-based Incentives:

  • Incentives for units in SEZ/NIMZ as specified in respective Acts or the setting up of projects in special areas like the North-East, Jammu & Kashmir, Himachal Pradesh & Uttarakhand