How Automotive Sector Can Help Fuel India's Export Dream Of $1 Trillion According to a pwc report, VIKSIT: An approach for India to achieve USD 1 trillion exports, EV manufacturing and sale, EV battery manufacturing and sale, and software-defined vehicle (SDV) enabling technology should be pursued towards building India's $1 trillion export story
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The Indian automotive sector is a major driver of employment in the country, generating direct and indirect employment of 37 million. As of FY 2023, India was the largest three-wheeler and tractor manufacturer, second-largest two-wheeler and bus manufacturer and third-largest passenger vehicle and heavy-duty truck manufacturer in the world. According to a pwc report, VIKSIT: An approach for India to achieve USD 1 trillion exports, the two-wheeler segment is the largest contributor to vehicle exports, followed by the passenger vehicle segment. The three-wheeler, commercial vehicle and tractor segments have smaller shares of exports. The report believes that export opportunities for EV manufacturing and sale, EV battery manufacturing and sale, and software-defined vehicle (SDV) enabling technology should be pursued towards building India's $1 trillion export growth story. Furthermore, several export opportunities stand to open in the fields of enabling services that will enhance the ownership experience associated with smart, connected and sustainable vehicles.
The current scenario
In FY 2019, the two-wheeler segment accounted for 70 per cent of vehicle exports, with a total of 32,80,841 units. This was followed by the three-wheeler segment, which made up 12 per cent of exports with 5,67,683 units. The passenger vehicle segment contributed 14 per cent to exports, with 6,76,192 units being shipped. The commercial vehicle segment had a 2 per cent share in exports, with 99,933 units being exported. The tractor segment accounted for 2 per cent of exports, with 91,792 units being shipped. Comparatively, in FY 2023, the two-wheeler segment has continued to dominate exports, with a 75 per cent share and 36,52,122 units being exported. The three-wheeler segment has witnessed a slight decrease in its share, dropping to 7 per cent with 3,65,549 units being exported. The passenger vehicle segment has maintained its 14 per cent share, with 6,62,703 units being shipped. The commercial vehicle segment has also maintained its 2 per cent share, with 78,645 units being exported. The tractor segment has increased its share to 3 per cent with 1,24,542 units being shipped, as per data, by the report.
How can EVs drive export growth
The growing potential for EV exports is reflected in the fact that India's EV exports grew at a CAGR of 88 per cent from $3.55 million in FY 2019 to $43.88 million in FY 2023. Indian OEMs in the EV space have announced investments and global companies have either already initiated investment in manufacturing facilities within India or are in the process of finalizing their plans.
It is estimated that investments worth over $11 billion are being planned by auto OEMs to develop and expand EV manufacturing capabilities in India. Additionally, multiple EV models are under development by various auto OEMs to not only cater to the growing domestic market but to also use India as a base to export to different parts of the world. While the global BEV market is expected to continue growing, finding solutions to challenges like government protectionism and reduced incentives and supply chain challenges due to geopolitical conflicts will be key.
"As India develops its EV production and technology, it will need to localise EV battery production across the three phases of cells, modules and packs. India has historically imported cells from countries such as China, South Korea and Japan. Batteries form a major portion of EV costs. However, the price of lithium-ion batteries, which dominate the current battery market, is expected to reduce from USD 132/kWh in 2021 to USD 58/kWh by 203027 as the automotive ecosystem players collaborate to scale up manufacturing," quoted the report.
Reducing the need for critical materials will be important for supply chain sustainability and resilience.
What needs to be done by private players and the government?
"Exporting cars containing a similar palette of technologies as those deployed by our competitors will not allow us to penetrate export markets effectively. This is because our exporters would not be able to match the 'scale-effect' already achieved by our competitors. Considering the same, it's very important to be radically innovative in terms of the value-add we provide to our users in the technology lifecycle and to explore how we could export the same while keeping in mind the need to service such technologies in our export markets at competitive prices," the report suggests to the private sectors.
According to the India Brand Equity Foundation's (IBEF) Automobile Industry Report 2024, the EV industry is estimated to create ~5 crore jobs by 2030. While continuing with the existing PLI Scheme, the government must institutionalize an innovation linked incentive scheme — specifically for next-gen industries and technologies such as smart mobility, hydrogen ICE and fuel cell.
"Under this scheme, manufacturing entities driving disruptive innovations within the smart mobility vehicles as well as the services must be suitably rewarded with tax benefits and other incentives," the report suggested to the government.
