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Highlights from USIBC’s First Automotive Roundtable

The U.S.-India Business Council hosted an automotive roundtable on January 31, focused on developing an advocacy agenda for the motorcycle, passenger vehicle and commercial vehicle sectors. USIBC organized the roundtable as the first in a series designed to convene industry leaders from both U.S. and Indian companies. Speakers included USIBC Senior Director Jasjit Singh; U.S. Chamber of Commerce Global Innovation Policy Center (GIPC) Senior Vice President Jonathan Weinberger; Alliance for Automotive Innovation Chief Policy Officer David Schwietert; and Ola Electric Mobility Co-Founder Anand Shah.

The session began with a presentation on automotive sector growth in the United States and India, the world’s largest and fourth largest automotive markets. As outlined below, auto markets are considerably different in the U.S. and India, reflecting the countries’ labor and fuel costs, as well as divergent consumer preferences. The roundtable focused on core auto issues including connected cars, privacy, content and auto-IT, and built on discussions held during USIBC’s connected car delegation to the Indian Mobile Congress (IMC) last year.

Held just a day before the announcement of India’s Union Budget 2020-2021, the session did not consider Budget implications – although the February 1 proposals offered little support for India’s struggling auto sector. Industry leaders had previously called for a reduction in GST on automotive goods to compensate for the hike in prices during the BS6 transition, clarity on a long-overdue scrappage policy, and incentives for manufacturers of electric vehicles and batteries. Instead, the budget increased custom duties on a range of both traditional and electric vehicles.

Session Highlights

U.S. Market: Participants emphasized a softening of the U.S. auto market in 2019, with trends including a rise in average vehicle age, escalating prices and a growing consumer preference for leasing instead of ownership. U.S. consumers increasingly choose vehicles based on fuel economy and utility, noted Alliance for Automotive Innovation Chief Policy Officer David Schwietert, as demonstrated by growing sales and registration in the light truck category. Amid this changing auto landscape, Schwietert called for industry and government to re-evaluate how regulation affects consumer spending.

Regulatory Headwinds: In the United States, industry faces significant uncertainty around federal regulation and incentives. This uncertainty is compounded by ongoing litigation between the state of California and the U.S. federal government over issues like greenhouse gas regulation. At issue is California’s stringent limits on vehicle carbon pollution, which exceed federal mandates. Automotive industry leaders have long urged clarity on state-level regulations, noting that uncertainty and instability limits businesses’ ability to make strategic investment and manufacturing decisions.

Indian Market Disruptions: Indian’s automotive market is expanding at a time of major disruption in the energy, electrification and mobile technology industries. Participants noted that continued growth in the consumer vehicle sector requires better regulation of congestion, traffic and parking in Indian cities. In addition, as India transitions to more stringent emissions norms, many consumers are postponing their vehicle purchases and seeking autos that will meet the new standard. (Note: India will formally transition to the Bharat Stage VI emission standard for all light-duty vehicles, heavy-duty vehicles, two-wheelers and three-wheelers in April 2020.)  Amid these challenges, ride-sharing companies are increasing their market share and lowering costs by switching to electric vehicles. The overall higher cost to purchase EVs is mitigated for drivers in the ride-sharing market, given that these drivers typically use their vehicles more frequently than most vehicle owners and can recoup the costs more quickly through lower fuel prices. These trends all contribute to an uncertain future long-term for India’s personal auto market.

Autonomous Cars and Electric Vehicles: In the U.S., technology innovation has made self-driving technology increasingly sophisticated. Still, the autonomous vehicle industry faces challenges due to a stream of regulatory requirements that complicate the process of bringing a fully automated car to market. So far, Waymo, Aptiv and General Motors are industry leaders with regards to full automation. In India, the government has cited electric vehicle (EV) adoption as a key to lowering emissions and meeting development goals. Despite this goal, the inclusion of a five percent duty on EVs and EV components in the 2020-21 Budget is likely – if enacted – to raise the cost of EV manufacturing. This additional cost would make EVs more expensive for consumers, working against the government’s desire to orient the automotive industry towards more environmentally friendly vehicles.

The Way Forward: The automotive industry plays a critical role in driving economic growth and job creation across both India and the United States. With both countries likely to be leaders in the sector, participants agreed on the need for clearer regulation, logistics standards and policies that support growth and innovation in the sector. A future trade agreement between the countries could facilitate increased foreign direct investment (FDI) into India’s automotive industry, supporting both traditional auto manufacturers and easing the transition towards technology-enabled and lower emissions vehicles.

 

For more information about USIBC’s work in the automotive sector, please contact Jasjit Singh.