The Indian automobile sector, which is recovering from a slowdown, saw 89 per cent growth in foreign direct investment (FDI) to USD 2.42 billion during the 11 month period of the last fiscal.
It had received USD 1.28 billion FDI in the April-February period of 2013-14, as per the Department of Industrial Policy and Promotion (DIPP) data.
According to industry experts, more FDI is coming into the sector because a lot of carmakers are utilising their Indian operations to fulfil global ambitions.
"It has become costly to manufacture cars in Japan and South Korea. Now automakers are looking for locations with cheap manufacturing and India has now become a hub for small car exports. Various companies like Hyundai, Nissan, Volkswagen and Ford are manufacturing vehicles here for their export markets," said Abdul Majeed, Partner, Price Waterhouse.
As per the Society of Indian Automobile Manufacturers (SIAM) data, car sales rose by 4.99 per cent in 2014-15 after falling for two consecutive fiscals, as lower fuel prices and softening of interest rates led to reduction in the overall cost of ownership.
In April, the first month of the current fiscal 2015-16, car sales rose by 18.14 per cent in April, the fastest rate of growth in 30 months, as the auto industry continued its journey on the road to recovery riding on improved consumer sentiments, new models and favourable fuel prices.
Domestic passenger car sales in April stood at 1,59,548 units compared with 1,35,054 in the same month of 2014.
Passenger car exports from India declined 1.66 per cent to 5,42,082 units in 2014-15 due to challenges in traditional overseas markets like Europe, Sri Lanka and Algeria.
Healthy FDI growth in the automobile sector has helped to push the overall growth in the foreign investment in the country.
During April-February 2014-15, FDI in India has increased by 39 per cent to USD 28.81 billion.
The other sectors where foreign direct inflows have recorded growth include telecommunication, computer software and hardware and pharmaceuticals during the period.
To attract foreign investments, the government is taking several steps, including improving ease of doing business in the country and relaxing FDI policy.
