AUTOMOTIVE INDUSTRY GLOBAL VALUE CHAIN – REPORT
NEWS: NITI Aayog today released a report titled “Automotive Industry: Powering India’s Participation in Global Value Chains”.
WHAT’S IN THE NEWS?
About the Report
• The report is a comprehensive review of India’s automotive industry and its integration into Global Value Chains (GVCs).
• It provides an in-depth assessment of opportunities, challenges, and strategic recommendations to enhance India’s role in the global automotive sector.
• The document aims to guide policymakers, industry stakeholders, and investors towards making India a preferred destination for automotive production and exports.
2. Global Context and Emerging Trends
• Battery manufacturing hubs are rapidly emerging across Europe and the United States, reshaping the traditional automotive supply chains and encouraging new global partnerships.
• The transition to Industry 4.0 is revolutionizing automotive manufacturing through the integration of:
• Artificial Intelligence (AI)
• Machine Learning (ML)
• Internet of Things (IoT)
• Advanced robotics and automation
• These technologies are fostering new business models centered around smart factories, predictive maintenance, and connected vehicles.
• Semiconductor usage per vehicle is expected to double from $600 to $1,200 by 2030, underlining the growing importance of high-tech components in future vehicles.
3. Global Automotive Market Snapshot
• The global auto component market was valued at approximately $2 trillion in 2022, of which $700 billion is traded internationally.
• Global automobile production has reached around 94 million units annually, reflecting strong recovery and sustained demand.
• The global market is growing at a rate of 4–6% annually, driven by rising income levels, urbanisation, and evolving consumer preferences for mobility solutions.
4. India’s Current Position
• India has emerged as the fourth-largest automobile producer in the world, following China, the United States, and Japan, with an annual production of nearly six million vehicles.
• India has carved a competitive niche in small cars, two-wheelers, and utility vehicles, supported by a robust domestic demand and export market.
• Under the ‘Make in India’ initiative, India is actively positioning itself as a global manufacturing hub for automobiles and related components.
5. Challenges Hindering India’s GVC Integration
• Despite its scale in vehicle production, India contributes a modest ~3% of the global auto component trade, amounting to around $20 billion.
• India has limited participation in high-precision segments such as:
• Engine components
• Drive transmission systems
• Steering mechanisms
• With a low global share of just 2–4% in these crucial areas.
• The sector faces systemic barriers including:
• High operational costs
• Infrastructural and logistics gaps
• Limited integration into GVCs
• Insufficient R&D spending
• Weak branding and international presence
• Skill gaps and talent shortages
6. Key Recommendations for Transformation
a) Operational Expenditure (Opex) Support
• Provide financial assistance to automotive firms for capital-intensive tooling, dies, and manufacturing infrastructure to enhance competitiveness.
b) Skill Development
• Launch targeted initiatives to develop a skilled workforce, capable of handling advanced automotive technologies and smart manufacturing practices.
c) Research, Development, IP and Branding
• Offer incentives for R&D, international branding, and facilitate technology/IP transfers to strengthen MSMEs and promote innovation.
d) Cluster Development
• Promote industrial clusters with common R&D labs, testing facilities, and shared supply chains to drive regional collaboration.
e) Industry 4.0 Adoption
• Encourage large-scale adoption of digital tools and automation, standardisation of quality, and integration with global best practices in manufacturing.
f) International Collaborations and Trade
• Facilitate joint ventures (JVs), foreign direct investments (FDIs), and sign Free Trade Agreements (FTAs) to enhance global market access.
g) Ease of Doing Business Reforms
• Simplify regulatory processes, improve flexibility in labour laws, enable efficient supplier discovery, and improve logistics and compliance mechanisms.
7. Envisioned Outcomes and Way Ahead
• The report projects that India's auto component production could rise to $145 billion, with exports tripling from $20 billion to $60 billion.
• This would result in a trade surplus of nearly $25 billion and increase India’s share in the global automotive value chain from 3% to 8%.
• The projected growth is also expected to create 2 to 2.5 million new employment opportunities, offering a significant boost to India’s manufacturing sector and overall economy.
8. Conclusion
• India holds immense potential to become a global leader in the automotive industry, particularly in the post-pandemic, electric and digital transition phase of the sector.
• Coordinated policy action from the central and state governments, supported by industry efforts and international partnerships, is critical to realise this potential.
• By addressing structural challenges and implementing the outlined interventions, India can:
• Attract greater investments
• Enhance its export capabilities
• Lead the world in sustainable, smart and scalable automotive manufacturing
Source: https://www.newsonair.gov.in/niti-aayog-releases-report-on-automotive-sectors-global-competitiveness/