Automobile industry in India: issues and challenges

Considering an insatiable demand for vehicles in an economy that is expected to grow at an average of 7% for the next 20 years, the automobile sector in the country will require disproportionate amounts of natural resources which will not only have economic cost implications, but also have strong environmental and social impacts, say the authors - Mr Souvik Bhattacharjya and Dr Shilpi Kapur, Fellows, Green Growth and Resource Efficiency Division; Mr Prahlad Tewari, Fellow and Mr Ganesh Chandra Mouli, Research Associate, Energy Environment Technology Development Division; and Dr Suneel Pandey, Director, Green Growth and Resource Efficiency Division, TERI.

Introduction

India is expected to become one of the leading economies of the world in the coming decades. With a population of more than 1.2 billion, it is the second most populous country after China and ranks third in terms of Gross Domestic Product (purchasing power parity), after China and the United States. With growing population, India is simultaneously experiencing massive urbanization. Between 1991 and 2011, the urban population increased from 26 per cent to 31 per cent. An estimated 10 million migrate to cities and towns each year for exploring economic opportunities. Growing population, particularly in urban centres, has resulted in the formation of a sizable middle-class, and India is soon expected to have the largest and youngest workforce the world has ever seen.

India's Automobile Sector:

Increased and better forms of mobility are one of the key outcomes of growth and development of any economy. It can also be argued that increased mobility will further promote economic growth and development since it connects people to jobs, markets, and services, and gives people a chance to gain equity in the political, economic, and social spheres. Considering an insatiable demand for vehicles in an economy that is expected to grow at an average of 7% for the next 20 years, the automobile sector in the country will require disproportionate amounts of natural resources which will not only have economic cost implications, but also have strong environmental and social impacts. Future growth will be associated with increased raw material extraction, pollution arising from production, processing of primary materials for production of auto components, GHG emissions during the manufacturing phase, use/operation phase, traffic congestion, etc.

TERI in association with GIZ India is undertaking a project supported by Federal Ministry for the Environment, Nature Conservation, Building and Nuclear safety (BMUB) and Ministry of Environment Forest and Climate Change, to understand the existing and future dependence on material resources of India's growing automobile sector and exploring opportunities of saving resources along the value chain for improved sustainability of the sector. The consortium is working with medium and small-scale industries producing auto components as well as the end of life vehicle (ELV) dismantlers in implementing pilot interventions to achieve material use efficiency. The three year project will also be developing policy framework and guidelines that would facilitate adoption of resource efficiency interventions across the automobile industry in India.

Facts & Figures

Automotive industry grew at the rate of 14.4% over the past decade, making India the world's sixth largest producer of automotives in terms of volume and value.

The sector employed 12.5 million people (about one per cent of India's population), directly and indirectly, and contributing nearly five per cent to India's GDP.

Currently, India's share to global production of automobiles is 4.9 per cent, making it the fifth largest producer after China, Japan, Germany, and South Korea. Government of India aims to make automobiles manufacturing the main driver of 'Make in India' initiative, as it expects passenger vehicles market to triple to 9.4 million units by 2026, as highlighted in the Auto Mission Plan (AMP) 2016-26.

Green Signal

What is needed is a resource-efficient model for this sector, which would include:

• Design of automobiles integrating design for environment aspects,
• Adoption of clean and resource efficient technologies in manufacturing of automobiles,
• Extending the lifetime of a vehicle,
• Scientific and safe methods for recycling end of life vehicles,
• A regulatory environment conducive to promoting innovation for new mobility,
• Promoting clean fuel technology for motorized modes,
• Strengthening infrastructure and access for public transport, and
• Support energy efficient and green modes of transport.