India Becomes worlds 3rd largest auto market for the first time, overtaking Japan and sitting behind the USA (second) and China (first). India has always been a key player in the global automobile industry. With approximately 4.25 million vehicle sales in 2022.
In recent years, the country has emerged as one of the fastest growing car markets in the world. In 2018, India overtook Germany to become the fourth-largest automobile market in the world. And now, according to recent reports, India has become the world’s 3rd largest car market, surpassing Japan.
This significant milestone is a testament to India’s strong economic growth, rising middle class, and increasing urbanization. The country’s auto industry has been booming, with major global players and world’s largest automakers such as Suzuki, Hyundai, and Honda establishing a strong foothold in the Indian market.
So, what are the factors that have contributed to India’s rise as a major player in the global automobile industry? Let’s take a closer look.
Rising Middle Class and Increasing Urbanization:
One of the primary drivers of India’s booming car market is the country’s rising middle class. As more and more Indians move up the economic ladder, they are looking to upgrade their standard of living. Owning a car has become a symbol of status and a way to showcase one’s success.
In addition, India’s urban population has been growing rapidly. According to the United Nations, India is expected to have 416 million urban dwellers by 2030 (making it the largest vehicle market in the world), up from 377 million in 2018. As more people move to cities, the demand for personal transportation has been on the rise.
Affordability and Availability of Financing:
Another key factor that has contributed to India’s rise as one of the largest auto markets is the affordability of cars and the availability of financing. The average price of a car in India is significantly lower than in developed countries, making it more accessible to a larger section of the population.
In addition, banks and other financial institutions have made it easier for consumers to finance their car purchases. This has made it possible for people to buy cars even if they do not have the necessary funds upfront. The availability of financing has also made it possible for more people to buy more expensive cars.
The Indian government has also played a significant role in the growth of the country’s auto market. The government has introduced a number of policies and initiatives to support the auto industry. These include tax incentives for manufacturers, subsidies for electric vehicles, and investments in infrastructure.
In addition, the government has taken steps to make it easier for manufacturers to set up operations in India. This has led to a number of global carmakers establishing manufacturing facilities in the country. By setting up operations in India as one of the largest auto markets, these companies are able to take advantage of the country’s low labor costs and favorable business environment.
The Society of Indian Automobile Manufacturers (SIAM) reported that new vehicle sales totaled 4.13 million from January to November. When December’s sales volume is added, the total rose to 4.25 million. Nikkei Asia predicts India’s auto sales volume will rise more depending on the commercial sales figures for Q4 and the year-end results of other automakers. India’s automobile industry has been unsteady in recent years; 2018 saw roughly 4.4 million vehicles sold, but this slumped drastically to below 4 million units by 2019.
Unfortunately, the outbreak of the COVID pandemic worldwide car market further declined, with sales bottoming out at under 3 million in 2020. The industry managed to begin regaining ground during 2021, although a global chip shortage prevented a return to pre-pandemic figures. Recovery from this scarcity is estimated to occur sometime in 2022 and will be furthered by electric-only vehicles’ marginal presence in India’s automotive sphere.
With 1.4 billion people, India is expected to exceed China’s population and also as the world’s largest automaker by the year 2025. While petroleum trade deficits persist, the government has also begun subsidizing electric vehicles.
The Japanese Automobile Dealers Association and the Japan Light Motor Vehicle and Motorcycle Association reported last year that 4.2 million vehicles were sold in Japan, a 5.6% drop from 2021. Despite Japan’s declining population, it is unlikely that auto sales will recover significantly in the foreseeable future. Japan’s largest auto market sales peaked in 1990 at 7.77 million units.
In 2006, China overtook Japan as the world’s second largest auto market, and in 2009, China surpassed the United States as its largest.
The report shows India’s worldwide car market has been volatile over the last few years and India becomes the worlds third largest auto market. China sold 26.27 million cars in 2021, while the U.S. sold 15.4 million cars. The number of vehicles sold in 2018 was 4.4 million, but the number dropped in 2019 due to a credit crunch.
After Covid, vehicle sales fell to under 3 million as the country locked down. The government began a recovery in 2021, approaching 4 million, which led to accelerated growth in 2022. Aftershocks of the semiconductor shortage that shocked the industry during the Covid continue to work their way out of the supply chain as we head into the mid-2023.
It says that while EVs are driving sales in places like China and the U.S., they have not yet been adopted in any meaningful way in India.
The majority of new cars sold in India last year were powered by gasoline, including hybrids, according to Nikkei Asia, while electric vehicles are barely present. The Indian market is seen as having fewer semiconductors than advanced economies. India becomes the worlds third largest auto market
According to Euromonitor, only 8.5% of Indian households owned a passenger vehicle in 2021. The Indian population is expected to grow to 1.4 billion by 2060.