The Automobile Industry

Why car making is one of the world's most important industries, how India became a major car producer, and how electric vehicles are shaking it up.

The automobile industry is one of the world’s largest manufacturing industries. It employs millions of people directly and many more in supplier industries like steel, glass, rubber, electronics and components.

Why it matters

Linkages: car making draws on many other industries, creating large supply chains.
Skills and technology: it builds engineering capabilities.
Exports: countries like Germany, Japan, South Korea and increasingly China and Mexico export large numbers of vehicles.

India’s auto industry

India has become one of the world’s largest vehicle markets and producers:

It is among the largest car markets in the world, and the largest market for two-wheelers, such as motorcycles and scooters.
Major clusters are around Chennai, Pune, Gurugram and Manesar near Delhi, and Gujarat.
Companies include Maruti Suzuki, Tata Motors, Mahindra, Hyundai, Bajaj, Hero and TVS.
India’s auto component industry supplies domestic car makers and exports worldwide.

The shift to electric vehicles

The industry faces its biggest change in a century: the shift to electric vehicles, or EVs.

EVs have fewer moving parts than petrol cars, changing supply chains and potentially reducing some jobs, such as those making engines and gearboxes.
Batteries become the most valuable component, and China dominates battery production.
Chinese car makers, such as BYD, have become major global competitors, especially in EVs.
In India, electric two- and three-wheelers have spread faster than electric cars, supported by government incentives like the FAME scheme and its successors.

Challenges

Car makers must invest heavily in new technologies while maintaining existing businesses. Established companies in Europe, Japan and the United States face intense competition from Chinese EV makers.

The electric auto-rickshaw

In many Indian cities, electric rickshaws and three-wheelers have spread quickly. They are cheaper to run than petrol or diesel versions, and drivers save on fuel. Their spread shows how EV adoption can start with smaller vehicles in developing countries.

Thinking EVs only change the fuel

EVs change what parts are needed, who makes them and where value lies. The shift reshapes supply chains, jobs and competition across the whole industry.

Key takeaways

The auto industry has large linkages to many other industries.
India is among the largest car markets and the largest two-wheeler market.
The shift to electric vehicles is reshaping supply chains, with batteries central.
Chinese EV makers have become major competitors; India's EV growth leads in two- and three-wheelers.