Rising Disposable Income :
Driving India's Automotive Demand Surge

Key takeaways

India’s auto industry contributed ₹20 lakh crore (USD 240 billion) to GDP in FY 2023–24, accounting for 6.8% of national GDP with a 12.5% YoY volume growth.

Two-wheelers dominate the production landscape with over 17.9 million units in FY24, comprising 75% of the total automotive market

Maruti Suzuki, with a 20% market share, and Hero MotoCorp, with 28.86% in two-wheelers, remain leaders in their respective segments

India’s automotive exports rebounded post-pandemic with a 35.9% YoY growth in 2021–22, led primarily by two-wheeler shipments

Bajaj Auto posted the highest Return on Invested Capital (ROIC) at 472.12%, reflecting unmatched capital efficiency in the industry

The industry’s Herfindahl-Hirschman Index (HHI) stands at ~1322, indicating low market concentration and a competitive structure

EV sales are rapidly accelerating, with projections reaching 6.34 million units by 2027, though ICE vehicles still dominate.

CRM systems in automotive optimize lead management, after-sales service, and predictive maintenance, significantly enhancing customer retention and operational efficiency

The automotive value chain is evolving with direct-to-consumer EV models replacing traditional dealership networks

India is projected to become the world’s third-largest automotive market by volume by 2026, with a forecast market value of USD 180 billion by 2024

Industry Overview

The Indian automobile industry has evolved significantly, transitioning from a closed market with limited players to one of the world's largest and fastest growing sectors. This transformation is marked by the entry of foreign automakers and the establishment of key players like Maruti Suzuki, which has consistently dominated the passenger vehicle segment, and Hero MotoCorp, which leads the two-wheeler market. In terms of global ranking, India is currently the third-largest automobile market in terms of sales. The sector's financial contribution to India's GDP has also grown substantially, rising from 2.77% in 1992-93 to about 7.1% and a turnover of around ₹20 lakh crore (USD 240 billion) in FY 2023-24. This represents a major economic impact of approximately 6.8% of the national GDP. The Indian automotive market is expected to reach a value of USD 160 billion by 2027, with a projected compound annual growth rate (CAGR) of 8.1%.

In terms of production, the Indian automotive industry manufactured approximately 23.28 million vehicles across segments in FY 2023-24. Two-wheelers constitute the largest share with 17,974,365 units, followed by passenger vehicles at 4,218,746 units, commercial vehicles at 967,878 units, and three-wheelers at 691,749. This high production volume underscores the sector's significant manufacturing capacity and its critical role in meeting domestic and international demand. The export market is also significant, with a 35.9% increase in exports in 2021-22. In FY24, two-wheeler exports stood at 3,458,416 units. These figures highlight the sector's ability to compete on a global scale. Segment-wise, the industry is diverse, with two-wheelers accounting for 75% of the market share in FY234. Passenger cars, once dominant, now hold a smaller share, while the utility vehicle (UV) and SUV segment is seeing a surge in demand with a 23% growth in volume and 39% in value in FY24. Maruti Suzuki has maintained its leadership in the passenger vehicle market, selling 113,575 units in June 2024, while Hero MotoCorp leads the two-wheeler segment4. The commercial vehicle segment is currently facing a slowdown6, while the electric vehicle (EV) segment is experiencing rapid growth and is projected to reach 6.34 million units by 2027. In 2023, India was the third-largest passenger vehicles market with sales of 4.1 million units, holding a global share of 5.19%, only behind China and the USA. The Indian automotive sector is a dynamic and evolving industry, characterized by a segmented market with distinct leaders across two-wheelers, passenger vehicles, commercial vehicles, and emerging electric vehicles (EVs). Two-wheelers dominate, holding 75% of the market share in FY23, followed by passenger vehicles at 18%. In June 2024, Hero MotoCorp led the two- The Herfindahl-Hirschman Index (HHI) is calculated by squaring each firm's market share and adding the results together. The scale represents 0-1500 Low Concentration, 1500-2500 Moderate Concentration & 2500- 10,000 High Concentration. The Indian Automotive Industries is in near 1300 which means it enjoying the low Concentrations in the market. Source – Screener & Finblage Research wheeler segment with 397,029 units sold, capturing a 28.86% market share. Maruti Suzuki led passenger vehicles with 113,575 units sold, while Tata Motors dominated the commercial vehicle segment with 25,919 units sold, commanding a 35.63% market share. These figures highlight the entrenched dominance of legacy players within their respective categories, even as the competitive landscape shifts with the rise of EVs and premium products. Traditional business models in the sector are undergoing transformation. Established manufacturers like Maruti Suzuki, Hero MotoCorp, and Tata Motors predominantly operate through franchise-based dealership networks. However, the EV segment is driving a shift toward more integrated models, with new players bypassing traditional dealerships and focusing on direct-toconsumer strategies, including home delivery and servicing. Bajaj Auto, which has seen a robust recovery post-COVID, exemplifies this evolution by leveraging premiumization trends, achieving a 17% CAGR in domestic two-wheeler volumes from FY22-24, gaining