How to start an automobile business in India?

  • Setindiabiz Team
  • January 20, 2024
How to start an automobile business in India?

This comprehensive blog delves into the dynamic landscape of the Indian Automobile Industry, currently the fourth-largest globally. Offering insights into its remarkable recovery post-pandemic, the blog details the dominant sectors within the industry, key players, and the surge in sales. It then guides aspiring entrepreneurs on how to set up a successful automobile business in India, covering crucial aspects such as planning, industry selection, location considerations, legal structures, and necessary licenses. Read further to enhance your knowledge

One of the most profitable ventures in 2022 is to start an automobile business in India. The Indian Automobile market is the 4th largest in the world in terms of value, next only to China, The US, and Japan. After a global slowdown in the auto industry during the pandemic, India was quick to recover in 2021, with a growth rate of 26.7% against the previous year. The industry registered record sales of over 3 million vehicles in 2021, out of the total production of over 4 million in the same year.
The two-wheeler segment dominates the Indian automobile market, accounting for approximately 80% of the total domestic sales, followed by passenger vehicles, commercial vehicles, and three-wheelers, accounting for 13%, 4%, and 3% of the total sales, respectively. A few key industry players that have registered huge net profits in India in the year 2021, include Tata Motors, Mahindra Mahindra, Toyota, Renault, Honda, and Nissan.

What are the types of automobile businesses in India?

Automobile businesses in India can be set up in the manufacturing, retailing, and service sectors. Manufacturing businesses can either produce finished products or spare parts for automobiles .Both of these have high demands inside and outside India. Merchandise retailing of both finished products and spare parts,however, is the most common and profitable auto business in India. Owners display their inventory collections in showrooms and sell products directly to the customers.
Big Indian brands in the auto industry like Tata Motors and Mahindra Mahindra manufacture and sell their products themselves through a network of brand stores. Businesses can also earn huge profit margins on the exports of vehicular products, with two-wheelers accounting for the maximum share. At the end of the fiscal year 2021, more than three million two-wheelers were exported from India to other countries.
The general public is not the only end-user of automobiles. They are bought and used by private and public passenger transport agencies, rental services like Ola, Uber, and Rapido, freight transport agencies, and home delivery services offered by several e-commerce sites. Besides, there are options for operating many business services in the auto sector, some of which include, repairing, servicing, cleaning, and towing business. Brokerage and insurance agencies are business services that help vehicle owners get necessary licenses, certificates, approvals, and registrations ensuring the safety and compliance of their vehicles.

How to start an Automobile Business in India?

A new business in the automobile industry can achieve success in no time, provided the following tips are followed before establishing it:
  • Plan and strategize: The first step towards opening a new business in any industry is to strategize a business plan and streamline business ideas. Your business plan should be detailed, flexible, and future-proof. This will help you overcome any forthcoming challenges instantly with ease.
  • Choose your industry: Choosing a field of operation for your business is the next significant step in the path of establishing a new automobile business. From a wide range of business options, you may choose single or multiple options based on your knowledge, expertise, and experience in the field. Thorough research and analysis determining the rate, scope, and pace of success in the industry must also be conducted, in addition to understanding competition, demand, and growth rates of demand in the industry.

    Investors and investments in the industry, the overall cost of operation and distribution, nature of the target buyer are a few other aspects for you to consider before starting your business.
  • Choose your location: Before you finalize the location for your business, you must ensure that it offers proximity, accessibility, and affordability of supply chains, low property, and rental costs, low cost of transportation, high population of target buyers in the local market, a high scope of expansion of customer base and business operations, safety, security, and sanitation of the area.
  • Choose your mode of operation: Automobile businesses, both merchandise, and services, usually operate in the offline mode only. This mode of operation is not only preferred by buyers but is also the only option for sellers and service providers in some cases.
  • Choose your name, logo, and brand: The name of your automobile business should be able to aptly communicate your field of business operations and your unique brand voice. For instance, the names Tata Motors or Hyundai Motor Company voice their brand names with “Motors” and “Motor Company” in the names indicating their field of operations.

    The name and logo of your business must not violate Section 4 of the Trademark Act, 1999 which states that the name of a new business must not mimic the name and logo of an existing business. You must also register the name and logo of your business to prevent others from copying and using them. At SetIndiaBiz, we provide expert assistance to our clients in Trademark registration of their new companies.
  • Get your funding, infrastructure, and logistics ready: Automobile businesses are capital intensive and need infrastructure, logistics, and heavy machinery to operate. This requires huge investments. Even services like cleaning, servicing, and repairing cannot operate without heavy machinery.
  • Choose the legal status of your company: Most automobile companies operating in India have a Private Limited Company status. However, the earnings and revenues in the industry are so high that even large businesses have found it beneficial to form partnerships for several reasons like manufacturing new products, rebranding,etc. For instance, Suzuki has partnered with drone manufacturing business Skydrive to develop high-tech, next-generation “flying cars” and Volkswagen has consolidated itself to rebrand as Skoda Auto in India.
  • Get registered and incorporated: Once you decide the legal status of your business, you can begin the process of registering and incorporating it. SetIndiaBiz will provide you with the necessary guidance and professional services concerning the same.
  • Get necessary licenses, certificates, approvals, and registrations to begin business operations: Once your automobile business is registered and incorporated, you need to get the necessary licenses and certificates. like any other business. Automotive Industry licenses, Tax, and GST registration, trading license, factory license (if required) EPFESIC, Contract Labour registration, pollution clearance certificate, EIN registration, fire safety certificate, etc are mandatory licenses that need to be obtained by an auto business in India.

    SetIndiaBiz offers all necessary services for obtaining licenses, registration, and certificates at an extremely affordable cost. To get detailed information, visit our website.
  • Get insurance: obtain important insurance covers for the safety of your business, property, product, and cover for the loss. Vehicle and commercial vehicle insurance are required for businesses like car rentals, delivery services, and passenger and freight transportation.
  • Hire staff: Businesses in the automotive industry require highly skilled and experienced employees. This might raise the labor cost for your business but would enhance its productivity in the long run.
  • Build a marketing team and channel: Online marketing has become a necessity for almost all kinds of businesses and products now. Additionally, many automotive businesses also publish their ads on print media like newspapers and magazines to promote their products. Broadcasting advertisements on television is also an effective way to market auto products and services.
  • Build a customer grievance and feedback system: Customer feedback is an important input for your business as it consistently gives you insights into their needs and convenience. This will help you improve the quality and competitiveness of products and services without the need of conducting market research and analysis of the same.
  • Organize a grand launching for your business: Invite potential customers, local industry leaders, competitors, suppliers, and other relevant guests to spread the word about your newly established business.

How can SetIndiaBiz help?

SetIndiaBiz specializes in providing company registration and post-registration services to all kinds of businesses, including automobile businesses, for the past several years. Our services are backed in quality by a team of professional and legal experts in the field, and our costs are most convenient for clients inside and outside India. Besides services, we also offer guidance to our clients with respect to legal and tax compliances post-incorporation. You can check out the details of our services on our official website.

Businesses in the automobile industry are most promising when they meet the dynamic needs, convenience, and desires of their customers. Following trends and updates of the consumer market and designing or modifying products accordingly is a significant key to the success of your business. A relevant example in this regard is the Electric Vehicle Segment that the public and private sectors alike are pouring huge investments in.



Q1: What are the key sectors within the Indian automobile industry?

The Indian automobile industry presents opportunities in manufacturing, retailing, and services. This includes the production of finished products or spare parts, retailing through showrooms, and various service-oriented businesses like repairing, servicing, cleaning, and towing.

Q2: What factors should be considered before starting an automobile business in India?

Before initiating an automobile business, it’s crucial to plan and strategize, choose the specific industry segment, carefully select the location based on accessibility and market potential, decide on the mode of operation (offline for most cases), and ensure compliance with legal requirements. Additionally, understanding competition, demand, and potential for growth is vital.

Q3: What licenses and registrations are mandatory for starting an automobile business?

Necessary licenses include Automotive Industry licenses, Tax and GST registration, trading license, factory license (if required), EPF, ESIC, Contract Labour registration, pollution clearance certificate, EIN registration, and fire safety certificate. SetIndiaBiz provides assistance in obtaining these licenses at an affordable cost.
Most automobile companies in India opt for a Private Limited Company status due to the nature of the industry. However, partnerships are also formed for various reasons, such as manufacturing new products or rebranding. The choice depends on the scale and goals of the business.

Q5: How can SetIndiaBiz assist in starting an automobile business in India?

SetIndiaBiz specializes in company registration and post-registration services. They offer professional guidance, ensuring legal and tax compliance post-incorporation. Services cover obtaining licenses, registrations, and certificates at an affordable cost. SetIndiaBiz’s team of experts supports clients in India and internationally, providing comprehensive assistance for a successful business setup.

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