Areas of ServiceAutomobileGENERAL INDUSTRY OVERVIEWThe automotive industry in India is one of the largest in the world as well among the fastest growing annually. India's automobile production across all categories was 1, 97, 24, 371 in the 2014-2015 Financial Year and 2, 04, 69, 385 in 2015-2016 Financial Year.1 This represents a 3.77 % increase in production of automobiles over a one-year period.2 India's passenger car and commercial vehicle industry is currently the sixth largest in the world.3 Over-all Exports have grown 14.89 % in the 2014-2015 FY from the 2013-2014 FY4 the total turnover of the Indian automotive component industry was estimated at USD 38.5 billion in 2014-15. Auto ancillary exports fetched USD 11.2 billion in the same year. The opening up of the Indian market following the economic reforms of 1991 and permission of up to 100% FDI in the automobile sector has been contributing factors to the sustained growth of the automotive industry in India. From independence, till 1991 there were very few automobile manufacturers in India producing few models. Following the economic liberalization, several Indian manufacturers have expanded their domestic and international operations. Further expansion of the sector has been due to India-specific investment by multinational automobile manufacturers setting up shop in India through their wholly-owned subsidiaries or through JVs with Indian manufacturers. India has a $44 billion automotive parts industry. The Indian Government, in its latest Foreign Trade Policy ("FTP 2012") had incentivized export of auto components by Indian entities to Brazil, Russia, Iran, China and South Africa by adding 23 auto parts (like locks, pistons, piston rings, oil filters, gearboxes, headlamps etc.) under the market-linked focused product scheme (MLFPS).5 According to the Automotive Component Manufacturers Association of India (ACMA), the Indian auto-components industry is expected to register a turnover of US$ 100 billion by 2020 backed by strong exports ranging between US$ 80- US$ 100 billion by 2026, from the current US$ 11.2 billion.6 The western hub of automobile manufacturing near Mumbai and Pune is one of the largest contributors to the automobile and automobile parts production in India. The Chakan corridor near Pune, Maharashtra accommodates the assembly plants of companies like General Motors, Volkswagen, Skoda, Mahindra and Mahindra, Tata Motors, Mercedes Benz, Land Rover, Jaguar Cars, Fiat and Force Motors. Gujarat is an emerging automobile manufacturing powerhouse with the manufacturing facility of General Motors in Halol and the planned Tata Nano plant at Sanand.7 IMPORTANT TRENDS IN THE INDUSTRY
MAJOR PLAYERS IN INDIALeading Indian companies
Leading MNC Companies in India
Important Industry Associations
IMPORTANT LAWS AFFECTING THE INDUSTRYMotor Vehicles Act, 1988 and Central Motor Vehicles Rules 1989
TAX LAWS AFFECTING THE AUTOMOBILE INDUSTRYIncome Tax Act, 1961
Transfer Pricing Regulations
Research and Development Cess Act, 1986
Custom Duty
Sales Tax / Value Added Tax (VAT)
Cenvat
REGULATORY AGENCIESThe Ministry of Shipping, Road Transport & Highways (MoSRT&H) acts as the central agency for formulation and implementation of various provisions of the Motor Vehicle Act, 1988 (as amended) and Central Motor Vehicle Rules, 1989 (as amended) ("CMVR"). Additionally, the Ministry of Environment & Forest (MoEF), Ministry of Petroleum & Natural Gas (MoPNG) and Ministry of Non-conventional Energy Sources also govern various aspects of the automotive industry. The MoSRT&H has constituted certain standing committees of eminent individuals to advise the MoSRT&H on various issues including safety, standards for regulation of emissions etc. on the basis of which the MoSRT&H may consider modification(s) / amendment(s) to the CMVR: CMVR- Technical Standing Committee
Standing Committee on Implementation of Emission Legislation (SCOE)
Automotive Research Association of India (ARAI)
CONCLUSIONThe Indian automobile industry is poised at the start of a great phase of growth. The potential of alternate-fuel vehicles has not been completely explored yet but holds great promise as research into more efficient electric vehicles and bio-fuels are being carried out at a tremendous pace. These vehicles will be less polluting and will pass on huge cost benefits to the owner of the vehicles. The duty benefits on imports of specific parts of hybrid vehicles can be a huge boost to this sector.16 India's Automotive Mission Plan 2006-2016, which is a collaborative effort between the Indian Government, the automotive industry and the academia, aims for India "To emerge as the destination of choice in the world for design and manufacture of automobiles and auto components with output reaching a level of US$ 145 billion accounting for more than 10% of the GDP and providing additional employment to 25 million people by 2016." The Indian automotive industry has witnessed significant growth during the first half of Automotive Mission Plan during which period all vehicle segments registered a compound Annual Growth Rate in excess of 10%. However, from FY 2011 the slowdown in global economy coupled with weakness in the fundamental growth drivers has resulted in decline in growth across vehicle segments except for two wheelers, which posted a CAGR of 4.6%. This has resulted in gaps between actual performance of the industry vis-à-vis targets envisaged under Automotive Mission Plan of 2006- 2016. The Indian Government however has now come out with the latest Automotive Mission plan for 2016-2026 seeking to define the trajectory of evolution of the automotive ecosystem in India including the glide path of specific regulations and policies that govern research, design, technology, testing, manufacturing, import/ export, sale, use, repair, and recycling of automotive vehicles, components and services. Such progressive and persistent steps taken by the Government along with active involvement of the industry stakeholders can ensure the creation of the right environment for growth of this industry at an exponential pace." 1 Domestic Sales Trend (July 07, 2016), http://www.siamindia.com/scripts/domestic-sales-trend.aspx 2 Industry Performance in 2014-2015 (July 07, 2016) http://siamindia.com/statistics.aspx?mpgid=8&pgidtrail=9 3 Overview of the Indian Auto Industry, http://www.knowindia.net/auto.html 4 Automobile Exports Trends (October 16, 2012), http://www.siamindia.com/scripts/export-trend.aspx 5 Auto parts firms to benefit from export incentives (June 11, 2012),http://www.livemint.com/Companies/b2lcRnC9MKoGfBaDl8WbYI/Auto-parts-firms-to-benefit-from-export-incentives.html 6 Indian Brand Equity Foundation, Sectoral Presentation (January, 2016), http://www.ibef.org/industry/autocomponents-india.aspx 7 New plant for Tata Nano at Sanand inaugurated 8 The Indian Automotive Industry (June , 2016), http://tata.com/article.aspx?artid=XFBpop5GFuM= http://www.kpmg.com/IN/en/IssuesAndInsights/ArticlesPublications/Documents/Auto_survey.pdf 9 Id. 10 New rules on CKD imports may hit carmakers that import engines, The Hindu Business Line,http://www.thehindubusinessline.com/industry-and-economy/economy/article1501157.ece 11 http://exim.indiamart.com/customs-duty/ch87.html 12 Customs Notification 1 of 2011, http://www.cbec.gov.in/ub1112/cs-explanatory.pdf 13 Supra note 8 14 Budget 2012: Auto industry welcomes incentives to promote hybrid vehicles, The Economic Times (March 16, 2012),http://articles.economictimes.indiatimes.com/2012-03-16/news/31201196_1_hybrid-vehicles-lithium-ion-electric-vehicle 15 Regulatory Framework http://www.siamindia.com/scripts/regulatoryframework.aspx 16 Id. |