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How the FDI in Automobile Sector in India will Boost the Economy?

How the FDI in Automobile Sector in India will Boost the Economy?

As global warming increases, making environmentally friendly decisions and preventing climate change is important. Electric Vehicles (EVs) is an eco-friendly choice of transport. A change in paradigm is currently taking place in the global automobile sector as it attempts to transition to alternative, less energy-intensive choices with the support of FDI in automobile sector

One of the primary drivers of India’s recent measures to accelerate the transition to e-mobility is the increase in prices for oil imports, rising pollution, and international pledges to battle global climate change.

It resulted in India’s commitment to an aspirational goal of having at least 30% of private automobiles, as EVs, by 2030 at the Conference of the Parties 26 (COP26) Summit.

Present Status and Future Aspirations of India in the EV Sector

  • The ranking of the Indian Automobile Sector is fifth globally and is expected to come up to third by 2030. India is the largest producer of two and three-wheelers in the world, the second biggest manufacturer of buses, and the largest producer of vehicles like tractors.  
  • Presently, the contribution of the automobile industry is 7.1% of India’s Gross Domestic Product (GDP) and 49% of its manufacturing GDP. 

This means that this has a significant impact on the nation’s economy. This suggests that the following trends, a lot of auto ancillaries, and associated sectors will be growing along with the EV industry in the upcoming years. 

  • Between April 2000 and March 2022, the sector attracted the inflows of equity from foreign direct investment (FDI) of $32.84 Billion, of which 6% of all FDI in Automobile Sector was in equities during that time. 

Steps to Boost the Growth of the Indian EV Sector

Firstly, a lot of conventional automobile players and oil companies are investing heavily in boosting EV demand to reach an aspirational goal. For example- Skoda revealed its plan for producing EVs locally in India in 2021, and Indian Oil Corporation shared its plans for creating 22,000 EV charging stations over three to five years.

Secondly, the Indian government has also implemented numerous programs in order to encourage the growth of electric mobility, which includes a 100 percent FDI route in the EV space, incubator programs, shared facilities to prototype, small-scale manufacturing, financial support by the Credit Guarantee Scheme for Start-ups, Tax breaks, and subsidy for consumers. 

Why is EV Sector an Opportunity for Good Investment?

The importance of the EV industry and its impending growth is already attracting investments of FDI in the automobile sector. In 2021, it had almost $6 billion in investments, which is expected to rise to $20 billion by 2030. 

Another important factor is that the internal lithium-ion battery production plans of the nation can lower the cost of EVs, thus reducing dependency and unsettling duties regarding import. That is why there will be a massive market in India soon. 

About FDI India

At FDI India, we help in the simplification of the complex structures of foreign investments and transactions under FDI with years of experience in the field. Our aim is to transform the face of FDI facilitation services in India by keeping our focus on sustainable investments or loans in order to help Indian businesses, such as through FDI in the automobile sector.

FDI India is transforming the investment climate of the country by simplifying the environment for business for investors. Its experts specialize across different sectors and states, handholding investors with their investment lifecycle ranging from pre-investment to after-care.

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