The lifting of lockdowns has put the auto sector on the road to recovery. There’s a clear user preference for personal vehicles, or social bubble-sharing vehicles, and a growing interest in electric, autonomous, and connected transport. With an aversion to higher discretionary spending, demand for used vehicles is on the upswing. The Indian auto industry accounts for 7.1% of the country’s Gross Domestic Product (GDP) and as per the Automotive Mission Plan (AMP) 2016-26, its contribution is likely to reach 12%, the world’s third-largest passenger vehicle market.
The industry is witnessing significant transformation, with sustainability and profitability visible on the horizon. Some of the broad trends include:
Entry of Electric Vehicles: The move to Electric Vehicles (EVs) helps consumers in managing fuel costs, improves the driving experience with enhanced energy efficiencies, and lessens environmental pollution, the bane of big cities. The National Electric Mobility Mission Plan (NEMMP) 2020 is providing a roadmap for faster adoption of EVs and their manufacturing in the county. In 2017, the Ministry of Heavy Industries shortlisted 11 cities for the introduction of EVs in their public transport systems, under the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India (FAME) scheme.
The EV space is heating up with new international entrants, and even ride-sharing platforms are aggressively expanding into the EV space in India. We are likely to see sizable advances in battery capacity, charging time, conducive infrastructure, and vehicle range owing to this broad trend. According to a report by Bloomberg New Energy Finance (BNEF), EVs will constitute 40% of the total passenger vehicle fleet in India by 2040. The country will need about 4,00,000 charging stations to meet the requirement for two million EVs that could potentially ply on its roads by 2026, according to a recent report by Grant Thornton Bharat-FICCI.
Interest in autonomous vehicles/Self-driven cars: Self-driven cars on Indian roads feel like a distant dream. Currently, R&D work is underway. Companies like Tesla, Mercedes, Ford, Nissan, Volkswagen, Hyundai, and others are leading the efforts by leveraging the latest technologies such as artificial intelligence, machine learning, and robotics engineering.
Autonomous driving technology has the potential to increase road safety by enabling greater standardization of driving conditions. However, driving in India with a huge number of vehicles on the roads is an intensely social process that frequently involves intricate interactions with other drivers, cyclists, and pedestrians. Countries, such as the Netherlands, Singapore, and the United States, leading the race in autonomous vehicles, standardized local driving conditions are a big advantage. Ultimately, the success of autonomous vehicles in India will require critical tasks, such as understanding the local environment, reducing congestion, and robust internet-connected car technology.
Connected vehicles: Car companies have long tried to load vehicles with technology. Smart cities’ infrastructure including optimization of parking lots, artificial intelligence-driven traffic lights, and EV-charging stations have got a big push under the government. Smart vehicles are transforming mobility in a big way. Connected services include live traffic updates, smart routing and tracking, roadside assistance in accidents, and automatic toll transactions. Luxury carmakers have raced ahead on innovation and top-end models boast new features like voice and gesture controls, with embedded sensors capturing data. However, telematics, sensors, and 24-hour live assistance mean car companies are having to upskill everyone in the automotive value chain, from salespersons to repair mechanics. There is an increase for specific call centers and increased collaborations with tech companies, software architects and programmers, to meet the new expectations.
Vehicle Scrappage: The launch of India’s vehicle scrapping policy, or the “Voluntary Vehicle-Fleet Modernisation Programme” in March 2021 ushers in a new age of what it means to own and use an automobile in the country. All commercial vehicles over 15 years old and personal vehicles over 20 years old are marked for scrapping. If the vehicles fail an automated fitness test, they will be deregistered and the owner can choose to scrap them, but cannot use them on the road. This new policy will make all stakeholders environmentally responsible.
Scrapped car parts have value in the scrap economy, and many parts are recycled or reused. Scrappage centers could help generate additional revenues for the industry. India is expecting about 22.5 million vehicles to reach their end of life by 2025. Of these, 18 million would be two-wheelers, about 3 million personal vehicles, and about 1.2 million commercial vehicles.
Mandatory testing of heavy commercial vehicles will start in April 2023 and that of personal vehicles by mid-2024. It will give India Inc time to come up with a new testing and scrapping ecosystem. For automakers, it creates an opportunity for new vehicle sales, and for consumers, it results in cleaner and efficient mobility.
Shared mobility set to pick up: Car rentals had started gaining popularity, but the pandemic introduced an aversion to social contact. As the Covid-19 situation is controlled, with increased vaccinations, and India enters the next normalcy phase, the car-sharing trend is likely to return as public transports (like metros and city buses) continue to be overloaded. Car sharing helps in saving the environment and in jobs’ generation. It leads to a consumer-centric marketplace with mobility becoming easier, safer, cheaper, and more comfortable.
Conclusion: Covid-19 has been a tipping point in the economy, affecting all sectors and industries. In the auto sector, there’s a push to embrace efficiencies, with people becoming mindful of costs and the carbon imprint of the choices they make. On the other hand, connected cars are bringing in an additional vow factor. A massive zone of opportunity emerges from the new upgrades, rapid changes in auto tech, and vehicle scrappage policies for the industry. For consumers, it eventually results in more choices, better economic efficiencies, and cleaner and safer modes of travel.
– Amit Kumar, CEO, OLX Autos India
