Automobile Industry was delicensed in July 1991 with the announcement of the New Industrial
Policy. The passenger car industry was, however, delicensed in 1993. No industrial license is
required for setting up of any unit for manufacture of automobiles except in some special cases.
The norms for Foreign Investment and import of technology have also been progressively
liberalized over the years for manufacture of vehicles including passenger cars in order to make
this sector globally competitive.
At present 100% Foreign Direct Investment (FDI) is permissible under automatic route in this
sector including passenger car segment. The import of technology/technological upgradation on
the royalty payment of 5% without any duration limit and lump sum payment of USD 2 million
is also allowed under automatic route in this sector. With the gradual liberalization of the
automobile sector since 1991, the number of manufacturing facilities in India has grown
According to the latest data available from Society of Indian Automobile Manufacturers (SIAM),
the overall production data for April-August 2010 shows production growth of 32.38 percent
over same period last year with industry producing 7,063,063 vehicles.
Automotive Industry comprises of automobile and auto component sectors and is one of the key drivers of the national economy as it provides large-scale employment, having a strong multiplier effect. Being one of the largest industries in India, this industry has been witnessing impressive growth during the last two decades. It has been able to restructure itself, absorb
newer technology, align itself to the global developments and realize its potential. This has significantly increased automotive industry's contribution to overall industrial growth in the country.
The automotive industry (including components & tyres) has already attained a turnover of Rs. 2, 20,600 crore. The industry provides direct and indirect employment to 13.1 million people. The contribution of the automotive industry to GDP has risen from 2.77% in 1992-93 to 4.14% in 2008-09. The industry is also making a contribution of 17% to the kitty of indirect taxes of the Government.