Auto & Auto Components

Asia-Pacific countries have contributed to growth of the global automobile sector. Developing Asia Pacific region will contribute 62.2% of auto and auto components sector growth for the period 2015-19. The quantitative growth in this region is expected to reach 101mn units in 2017 at a CAGR of 5%. India is a significant contributor from this region with a potential to become the 4th largest automobile producer by 2020. Automobile sector contributes 7.1% to the Indian GDP and was more than 45% of manufacturing GDP in FY14. Karnataka is the 4th largest state in automotive production with output of USD 2.8 bn, contributing 8.5% to national sector output. The automotive industry provides employment to more than 55,000 workers in the state of Karnataka.

Key drivers for growth in the segment:

Indian auto components industry is expanding its footprint in the global market as seen in sharp growth in auto exports from India. India is emerging as export oriented manufacturing destination for global OEMs. Indian Automobile Manufacturing is dominated by two wheelers (80%) followed by passenger vehicles (13%). Further two wheelers comprised of 70% of automobile export in FY15. Automotive has been identified as focus sector in Industry Policy 2014 – 2019 of Karnataka.

The presence of robust domestic customer base with more than 14 million registered vehicles in the state makes it an attractive investment destination. Karnataka has many drivers for auto component industry to cater local, national and international markets. The leading OEM, Tier I & II companies located in Karnataka, form the entire value chain. The proximity to the Western (Maharashtra & Gujarat) and Southern (Karnataka, Tamil Nadu and Andhra Pradesh) auto clusters in the country through Dedicated Freight Corridor between Chennai- Bengaluru and Mumbai-Bengaluru. Connectivity to 6 ports via NH and SH to facilitate growing exports in the sector. In Karnataka, highly skilled workforce is available with more than 1400 ITIs, 350 R&D centres and 200 engineering colleges driving innovation in the state.

Track Record:

Growth in automobile industry is the highlight of manufacturing sector in India. Automobile production has more than doubled from 11.17 million in 2009 to 23.4 million in 2015. Export of two wheelers from India has doubled over last 6 years, growing at CAGR of 18%. FDI in automobile sector has grown at a high rate of 38% CAGR between the years 2011 – 2015. In the auto component sector there are more than 6000 players in the market generating a turnover of USD 36.1 bn in FY-2015.

Karnataka accounts to more than 6% of country’s auto component output of the country. Karnataka’s automobile output has doubled in 4 years, registering a 36.5% CAGR. Investments of around 700 mn USD are generating annual revenues of 600 mn USD. Over 50 automobile component manufacturers are operating in the state accounting for a turnover of more than USD 1.5 billion during 2014 – 2015. Auto clusters are located at Hoskote in Bengaluru Rural, Bidadi in Ramanagara and at Dharwad in Karnataka. Industrial valve cluster is located at Hubballi – Dharwad belt and Auto components clusters in Shivamogga and Belagavi districts.

The Automotive Mission Plan 2006-16 has set target for exports of USD 40–45 bn in 2016, including component exports worth USD 20–25 bn and outsourced engineering services worth USD 2–2.5 bn. Under Government of India’s FDI policy automobiles sector is entitle to automatic approval for foreign equity investment up to 100% with no minimum investment criteria. Under National Automotive Testing and R&D Infrastructure Project (NATRiP), a unique initiative between the Government of India, a number of State Governments and Indian Automotive Industry, seven Testing, Validation and R&D infrastructure will be set up in the country in near future.

The Government of Karnataka will commission the 'Karnataka Automobile Research & Innovation Centre' which would also be an incubation centre. The centre is proposed to be established on a PPP model with State support. Automotive Sector industries declared as public utilities under Industrial disputes Act 1947 during the policy period.

The Government of Karnataka will offer various Incentives and Concessions based on size & location of the investments. Large, mega, Ultra and Super Mega enterprises will get based on their investments exemption from Stamp Duty, concessional Registration Charges, reimbursement of Land Conversion Fee, exemption from Entry Tax, subsidy for setting up ETPs and interest free loans on Net VAT and CST. Medium, small and micro enterprises based on their investments will get investment promotion subsidy, exemption from Stamp Duty and reimbursement of Land Conversion Fee, etc. The Government also plans to give marketing financial and infrastructure support to MSMEs.

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