India and the European Union consist of the world's largest economies in terms of GDP with equally vast automobile industries. Despite wars, pandemics, and the financial crises of 1998 and 2008, these countries remain highly prominent and relevant in the automobile and manufacturing sector. The Europe India Centre for Business Industry (EICBI) is all set to hold the Europe India Leaders Conference 2024 at the European Parliament in Brussels on the 6th of March. The theme of the Automobile sector in the EU-India corridor will be thoroughly explored. The EU-India Leaders Conference is EICBI's 5th major engagement at the European Parliament and the 30th major conference in Europe. The conference will have a panel discussion on companies that have successfully collaborated or have potential collaborations on automotive projects between the EU and India, allowing the panelists to share their insights and engage in different discourses about automobiles, energies, free trade agreements, and financing.
The automotive sector in India accounts for 7.1% of its GDP, with the export percentage of 79% for two-wheelers; it is one of the world's largest two-wheeler manufacturers. There has also been an FDI inflow of $33.77 billion in the industry from April 2000 till September 2022. Until the liberalization of the economy, India's automotive goals were mainly accomplished by domestic companies like Tata Motors, Mahindra, Maruti Suzuki, and Hindustan Motors with their Ambassador car. Although key contributors, these meant limited accessibility; production was low while the cost was high. Post-1991, an influx of international brands was seen, and demand surged; in 2013, Toyota accounted for 6.3% of production in Central and South Asia as per its business locations. The demand was further reinforced by auto loans. European models, namely Mercedes-Benz, Audi, BMW, MINI, Volkswagen, and Skoda too entered as prominent players are highly popular even today. Similarly, the EU's automotive industry represents 7% of its GDP and 6.1% of total employment; with its prime focus on safety and sustainability, it is the most rapidly growing and significant sector in the region. The EU's car trade also recorded a €70 billion trade surplus in the first three quarters of 2023.
Besides the prominent Indian diaspora and cultural influence in parts of Europe, the countries share diplomatic values and trade relations through platforms like G20, India-EU summits agreements, and the newly initiated India-Middle East-Europe Economic Corridor (IMEEC) Corridor. Together, these countries hold immense potential for collaborative ventures in the global automobile industry. Tata Motors, in particular, has been the central character for global interconnectedness of the automotive sector, based on its Annual Report 2022-23; in Europe, a revenue of Rs 42,731 crore was generated, while 2 manufacturing and 1 Research and Development sites have been established by Tata Motors. The report also identifies energy inflation in Europe and how the demand decline in these regions might bring down revenues significantly, especially with commercial vehicles; claiming that European natural gas prices declined by 76.1% amid lower consumption and high storage levels. This is an important factor, considering the ongoing Russia-Ukraine war, which brought economic sanctions subsequently hindering supply chains, impacting raw material prices, and resulting in market uncertainty.
The Fluid Control Research Institute (FCRI) in Palakkad, Kerala is a premier institute in our country rendering industrial services and solutions to the industry. It was established in 1987 with technical and financial assistance from UNDP and works as an autonomous body under the ministry of heavy industries with full-fledged NABL accredited laboratories. According to reports, these laboratories are said to be at par with facilities in Europe. Additionally, institutions like National Automotive Testing and R&D Infrastructure Project (NATRIP) and the Automotive Research Association of India (ARAI) also promote research and development and training in the automobile sector in India, which can provide layouts for future collaborative schemes.
With the conclusion of COP 28 recently, several nations are working on collaborating in research and regulation in the automobile sector. India and the EU also share values in the spheres of energy transition, technology, and financing. The India-EU Trade and Technology Council Working Group 2 held a two-day international workshop on Green & Clean Energy Technologies where e-vehicles as a key solution for a sustainable future were set forth. Besides emission norms and environmental concerns, a key trend and potential link in the automotive industry could be accessibility and digital public infrastructure. India has experienced tremendous success and praise in the digital payment sphere, and a growing global technological role can be seen in transport and automobiles with applications like Uber and Ola; perhaps the same learning can be applied to the automobile sector with the help of the phenomenon of "Internet of Things." This can be further reinforced by advanced manufacturing practices in Electronic Vehicle manufacturing.
EICBI has conducted consistent dialogues to promote trade relations between New Delhi and London; these have proved to benefit the markets, opportunities, delegations, and several market ventures. It focuses on international relations and geopolitical developments between India, the United Kingdom, and the European Union, aiming to strengthen business and trade ties; Facilitating a platform for companies to come together, network, and also the ground support required for them to expand and flourish. On this account, non-governmental organizations and think tanks are a crucial element in bringing in business possibilities that the automobile sector can assuredly benefit from.
In an event, India's External Affairs Minister Dr. S. Jaishankar acknowledged the India-EU TTC and its cooperation in trade, green transition, and digitalization. He also emphasized that businesses have a primary role in driving sustainability, further referring to the ongoing India-EU FTA negotiations expecting it to be a ‘game-changer’ in their relations. "Being one of its largest and most important trade partners, India looks forward to a mutually beneficial, mutually advantageous conclusion to the negotiation process within a reasonably short planned timeline" he said. With the shared interests and cooperative history of both nations, aligning policies and regulations to create a conducive environment for collaboration is crucial; therefore, it is imperative to address trade barriers and tariffs. Setting FTAs with UK, Australia and the UAE as the blueprint, we shall look ahead and strengthen India and EU’s strategic autonomy stronger and deeper than ever before.
The European Union with its 27 member states has deep connections with India; both are spearheads in the automotive sector with a rich history of innovation, engineering prowess, and a commitment to sustainability. The countries hold immense potential for collaborative ventures in EV manufacturing, Digitalization, Energy, and Research and development. Through the upcoming FTA, it can be hoped that they navigate promising and sustainable results. In the words of Dr. Jaishankar, "The India-EU FTA is our very important goal. And the TTC will provide the structure and strategic guidance to this partnership as it moves forward."
(Purvi Agarwal is a research fellow at Europe India Centre for Business and Industry.)
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