India is an emerging global manufacturing hub for low-cost compact cars. It is Asia’s third-largest passenger vehicle market and the world’s second-largest two-wheeler market. It is also the world’s fourth-largest commercial vehicle market. Changing demographics, rising disposable income and entry of several new players has expanded the domestic market for passenger vehicles. Low manufacturing costs due to economies of scale, low R&D and sourcing costs, are increasing affordability and driving domestic demand.

The Indian automotive industry is expected to be the world’s seventh-largest automobile market by 2016 and the third largest by 2030, only behind China and the US. Recent acquisition of Jaguar and Land Rover brands by Tata Motors and launch of world’s cheapest car, Tata Nano, has placed the Indian automobile market on the global automotive map.

Total value of vehicle exports is estimated to reach US$ 8 billion to US$ 10 billion by 2015. The industry turnover is estimated to reach a level of US$ 155 billion by 2016. Overall production of automobiles increased from 8.7 million units in 2004–05 to 11.4 million units in 2008–09. Between 2000 and 2009, the industry witnessed a cumulative foreign direct investment (FDI) flow worth US$ 4.3 billion accounting for 4 per cent of the total FDI into the country. Passenger cars, accounting for 78.6 per cent of the total PVs produced, grew at a compound annual growth rate (CAGR) of 15 per cent in 2008–09. This segment is expected to grow at 12 per cent annually over the next five years to touch 3.75 million units by 2014.

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