India is transitioning its automotive industry with advancements in EVs, connectivity, and ADAS. Government initiatives like ‘Make in India’ and PLI schemes are driving this change, positioning India as a key hub for automotive production and innovation, writes Soumen Mandal, Senior Analyst at Counterpoint Research.
In 2023, India ranked fourth in passenger vehicle (PV) sales, accounting for more than 5 per cent of the global market. Even as India grows to become a big automotive market, the strong foundation of its automotive sector is driving rapid advancements across segments like electric vehicles (EVs), embedded connectivity, ADAS/AV and digital cockpit. Moreover, the automotive supply chain in India is also going through a rapid transition due to various government initiatives like ‘Make in India’, Production Linked Incentive (PLI) schemes, manufacturing subsidies and reduction in various import duties. All this is making India self-reliant and slowly transforming it into an important hub for automotive production.
Electric vehicles
India is still in the early stages of adopting passenger EVs, but this trend is gaining momentum with the launch of new models by various automakers. In 2023, EV sales in India constituted only 2.3 per cent of total PV sales in the country. While this figure looks modest compared to the global EV market’s share of 12.4 per cent, it represents a remarkable 97 per cent YoY growth in India’s EV sales. This surge can be attributed to growing consumer interest, government initiatives and infrastructure improvements. Tata Motors led the market in 2023, followed by MG Motors and Mahindra.
By 2030, passenger EVs are projected to comprise almost one-third of India’s PV market, a significant increase from the current 2.3 per cent. India’s EV ecosystem is expected to take a strong and sustained growth trajectory, pushed by the combined efforts of original equipment manufacturers (OEMs) and government initiatives such as subsidies, PLI schemes, Make in India and reductions in import duties.
- Initiatives by OEMs: To achieve market leadership by 2030, automakers such as Tata Motors, MG and Mahindra are making substantial investments as part of their EV expansion strategies. Each OEM has unveiled plans to introduce new models featuring advanced technologies to drive EV sales. Maruti Suzuki, India’s largest PV seller, is expected to launch its first EV by late 2024 or early 2025. Maruti’s entry into the EV market has the potential to significantly reshape India’s current EV landscape. Besides, other OEMs like VinFast and Tesla have decided to establish EV production facilities in India. VinFast has already initiated the construction of its manufacturing plant, while Tesla is expected to follow suit soon.
- Government initiatives: The government aims to increase the share of EVs in overall PV sales to 29 per cent by 2030, supported by subsidies and a reduction in import duties to 15 per cent. In conjunction with these measures, initiatives like the PLI scheme for Advanced Chemistry Cells (ACC) and the Make in India campaign will play a crucial role in reducing manufacturing costs for EVs.
- Infrastructure development: Besides launching new models, major OEMs such as Tata Motors, Maruti Suzuki and Mahindra have announced substantial investments in establishing battery manufacturing facilities and a robust network of charging stations across India. Maruti Suzuki plans to invest over Rs 7,000 crore to set up a new battery manufacturing plant and develop charging infrastructure, while Tata Motors and Mahindra are set to invest Rs 18,000 crore and Rs 12,000 crore respectively to bolster their EV initiatives. Currently, a majority of EV batteries are imported. Establishing battery assembly or manufacturing plants domestically would significantly reduce the manufacturing costs of EVs, thereby enhancing affordability. On the charging infrastructure side, India currently has 12,146 public charging stations.
Embedded connectivity
Although India’s EV penetration rate is relatively low, the connectivity adoption rate is a bit higher and has been growing at a fast pace in the last few years. The connected car share in all PVs sold in 2023 was 31 per cent, a YoY growth of 46 per cent. Although this is quite low compared to the global connected car penetration of 70 per cent, the growth from 4 per cent in 2020 to 31 per cent now is quite phenomenal.
For decades, the focus of auto industries in growing economies like India revolved around reducing maintenance costs, improving fuel economy and enhancing engine power. However, these traditional norms are changing with rapid advances in technological adoption and innovation. A plethora of new features are available, like connectivity and services, which are changing consumer outlook towards cars. Today’s Indian consumer wants greater comfort, safety and security from vehicles. The growing demand for advanced connectivity technologies among the country’s tech-savvy population is driving the growth of connected cars in India. At the same time, it presents an opportunity for manufacturers. The OEMs need to grab it and differentiate their products from the competition. This requires participation from all stakeholders, such as telecom players, automakers, component manufacturers and service providers, to meet consumer demand for seamless in-car connectivity.
Connected car services include safety like diagnostic reports, crash detection, intrusion alerts and e-calls, navigation such as live traffic, ‘find my car’, location-based search, geo-fencing and smart routing, and other advanced technologies such as remote vehicle control, voice command, multimedia content streaming and live weather. As Indian consumers are highly cost-sensitive, many OEMs are offering these services for free with new cars for periods ranging from one to three years. The aim here is to create awareness and make such services popular.
With the rising EV penetration as well as the trickling down of connected experiences to the mass market, aided by affordable and ubiquitous cellular connectivity, we estimate that 80per cent of the cars sold in India will have some level of in-built connectivity by the end of this decade. The connected car sales are expected to grow at a CAGR of 21 pr cent between 2023 and 2030. The adoption of 5G technology in automotive connectivity, starting most probably by this year’s end, will be a game changer, as it will significantly enhance consumers’ positive perception towards connected cars.
At the same time, the growth of connected cars will also require addressing cybersecurity concerns and the importance of safeguarding consumer data.
Digital cockpit
With changes in car architecture, the cockpit is evolving to make our journeys safer, more comfortable and more entertaining. We have witnessed significant advancements in car cockpit offerings, from simple car stereos to central infotainment systems powered by high-computing SoCs. Modern cars now feature multiple displays, including central infotainment screens, digital instrument clusters, digital side-view mirrors, digital rear-view mirrors, co-pilot displays, heads-up displays (HUD) and rear-seat entertainment displays.
AI is also transforming the in-vehicle experience with voice assistants and personalized driving profiles. These AI-based features, combined with connectivity services, will create new revenue streams for OEMs and service providers.
In India, the adoption of multiple displays in cars is gradually increasing, with nearly 90 per cent of cars now having at least one display. Typically, 7-8-inch screens are common, but we expect screens larger than 10 inches to become standard in most passenger cars by the end of this decade.
Autonomous vehicle
Like EV adoption, the adoption of ADAS in India is also in its early stages. In 2023, only 1.4 per cent of total PVs sold were equipped with ADAS features. The sales of cars with Level 1 (L1) ADAS, which includes Adaptive Cruise Control (ACC) alongside Forward Collision Warning (FCW), Automatic Emergency Braking (AEB), Blind Spot Monitoring (BSM) and Rear Collision Warning (RCW), were less than 15,000 units, while cars equipped with Level 2 (L2) ADAS features, like Lane Keep Assist (LKA) and Lane Follow Assist (LFA), in addition to L1 features accounted for 1.1 per cent of total PV sales in 2023. Currently, Mahindra, Hyundai, Kia and MG are the leading car brands when it comes to providing ADAS features.
By 2030, ADAS adoption is projected to account for 61 per cent of total PV sales, with L1 vehicles constituting 42 per cent and L2 making up 18 per cent of this share. We expect L1 ADAS to become a mandate from the government for safety and security reasons, due to which the share of L1 in 2030 would be higher than that of L2. Besides, vehicles with Level 3 (L3) ADAS, capable of hands-free driving across selected highways, are expected to account for 1per cent of total PV sales, primarily concentrated among premium brands such as Mercedes-Benz, Volvo, BMW, BYD, Tesla, Audi and VinFast.
Before moving to L3 and other higher levels of autonomy, India needs to address several challenges. Infrastructure requirements like proper roads, high-speed internet connectivity such as 5G, smart traffic management and removal of network black spots in highways, are very crucial.
Conclusion
Despite lagging behind global benchmarks in technology adoption, India’s automotive sector is swiftly advancing due to proactive efforts by OEMs, the government, and ongoing geopolitical developments. Moreover, rising consumer awareness and increasing demand for advanced technologies are set to accelerate India’s alignment with global standards.
Disclaimer: The views expressed by the author are his own and do not necessarily reflect the views of FMM magazine.