SHARP CURVE AHEAD

From more stringent safety and emission norms to a bigger fundamental shift towards EVs, the fast-growing Indian automobile industry is staring at an unprecedented churn

Over the last decade, the Indian automobile industry witnessed robust growth, made a mark globally and is finally doing justice to its latent potential. A mix of prudent regulatory framework that laid the foundation of India as a global hub for small cars and two-wheelers, coupled with an aggressive industry saw turnover of the sector treble from an estimated `1.65 lakh crore in 2006 to nearly `5 lakh crore in 2016.

Barring China, no other country has witnessed this kind of growth in a decade when the global economy was singed by the 2008 economic recession. Today, India is the largest producer of two-wheelers and tractors globally, the fourth largest car producer and among the top 10 commercial vehicle manufacturing nations. And, every third small car in the world is manufactured in India now.

Yet, the industry has only scratched the surface of the huge potential that exists. India, at just 24 cars per thousand people, compared to 500 for developed economies and a world average of 170, has a long way to go before the market begins to saturate. The government’s own projections for the next decade under the Auto Mission Plan 2016-26 (see Proposed Auto Policy), sees turnover grow more than three-fold between `16,16,000-18,88,500 crore based on an average GDP growth of between 5.8-7.5 per cent. That would generate over 65 million jobs, direct and indirect, over and above the 25 million generated in the previous decade.

The journey over the next decade is not going to be easy. There are major disruptions on the way, from safety to emissions, where India is fast aligning itself with the world. Some are unprecedented. The government has already advanced the timeline for stricter BS VI emission norms that are modelled on the Euro VI norms, from

2024 to 2020, leapfrogging BS V norms in the process. Nowhere in the world has a market jumped from Euro IV to Euro VI norms directly. While this would mean significant reduction in tail pipe emissions, it entails significant investments from both auto and oil companies.

This is in conjunction with the roll-out of Corporate Average Fuel Efficiency norms earlier this month that stipulates a specific average fuel economy for the entire fleet of a company and penalties for non-compliance. While current standards are benign, they will progressively get challenging. Cars would need to be 10 per cent more fuel-efficient by 2021 and 30 per cent or more from

2022 onwards. The mileage improvement is based on how many litres of fuel is consumed by a vehicle for travelling

100 kilometres.

Similar strides are being made in the field of safety. Even today, the majority of cars sold in India do not have safety features like airbags and anti-lock brakes that are now considered mandatory in many parts of the world. This is despite the fact that more people die on the road in car accidents in India than anywhere else in the world. Between 2014 and 2016, Global NCAP, a UK-based independent body that conducts crash safety tests on cars across the world, tested 12 Indian cars including Maruti Alto, Swift, Celerio, Nano, i10, Scorpio and Kwid, among others, for safety. All of them scored a zero.

All that will change over the next few years. Already, new cars launched since last October comply with crash safety norms for full and offset frontal impact and side impact. They would eventually cover all cars by October next year. Cars would need to clear these tests at a speed