After being open to FDI in 1991, the Indian automobile sector has come a long way to become the fourth-largest auto market after displacing Germany and is expected to displace Japan as the third-largest auto market by 2021.
Sticking to the topic, considering the contribution of 7.30% into the country's GDP and 49% to the country's manufacturing GDP, the question of lack of investment in EV technologies remains out of question. And surely, automobile manufacturers invested over $501 million in India's auto-tech startups with the EV startup ecosystem reaching $397 million worth of investment flow after registering a growth of 170%.
The Government of India aims to develop India as a global manufacturing center and a Research and Development hub, and have taken several steps to achieve that as well. Under NATRiP, the GOI is in the advanced phases of setting up R&D centers across the country to boost the adoption rate of EVs in the economy and generate a cash cow for the future auto industry.
Now, let's try to decode some of the potential growth areas as well as issues to be solved in order to understand the industry better and what to expect from it in terms of economy.
Roads and railways account for more than 90% of passenger and freight traffic in the country. Despite huge investments in roads and railways, the lack of infrastructure still haunts India. The cost of congestion is on a rise with a $10 billion worth loss reported in 2020 itself as of November. The numbers are nowhere showing any sign of coming down unless there are some smart decisions taken in regards to the issue.
Despite having the second largest road network in the world with 5.89 million kilometers in length, the problem of congestion and delayed transportation of goods continues to hurt the economy. Of course projects like Bharatmala-1 worth 10lack crore and Sagarmala project worth 8.57lack crore sought to improve the connectivity of the country internally and with the world with a vision of improving the flow of traffic, but still we need something more innovative.
Innovation does not always mean pumping huge money, but coming with the most effective solution. We live in a world where autonomation is an inevitable future. Keeping the cons of autonomation aside, we are able to visualize a smooth functioning economy in terms of productivity and output. The automobile sector interestingly in the country was the first industry to welcome autonomy and is well ahead of most of the developed countries in the world in that regard.
Autonomous vehicles are tipped to be the first large-scale commercial application of AI. This has spurred up global investments in the field of AI and computer vision. It is this huge potential the auto sector has provided which has allowed the biggest investments in the field of AI to be made in the auto sector.
According to the Stanford AI index, the error rates of object classification are coming down significantly which has provided a suitable condition for Indian manufacturers to confidently start putting money in the technology.
Assisted vehicle technology is gaining popularity among industrialists of the auto sector in India. Investment in autonomous vehicle technologies and extracting export potential out of it is what the country needs to ensure its leadership in the auto sector in the future.
The auto sector depends on government policies and the recent announcement of the development of 100 smart cities in the country, has provided with a huge potential for automakers to adopt the technologies of the future to serve India's future demands. Driverless cars still seem a horror movie for Indian roads and existing cities, however, the upcoming smart cities will definitely give birth to innovative startups in the sector seeking to serve the newly generated demand.
The government of India is already working in the field of AI and has also come up with various initiatives promoting it. #AIForAll is working to nurture the next generation of engineers for the country by promoting investments in education and the AI ecosystem. This is going to be a gamechanger for the economy as the problem of skilled labor is thought to be solved on the success of the new education system and initiatives like AIForAll.
Autonomation requires huge investments which the Indian auto sector is capable of providing. The only thing holding India back is India itself. One of the problems with democracy is the delayed policy implementation which is costing the country time and money. The sector seems promising for the country and will definitely define India's future as a superpower.