Advantage India
Robust
Demand
* Growing working population and expanding middle class are expected to remain key demand drivers.
* India is witnessing robust demand for auto components amid ongoing shift in global supply chain.
* With plans to reduce auto components’ import dependence, domestic players are expected to witness a demand surge.
Export
Opportunities
* India is emerging as a global hub for auto component sourcing and the industry exports over 25% of its production annually.
* Auto component exports from India is expected to reach US$ 80 billion by 2026.
* By FY28, the Indian auto industry aims to invest Rs. 58,000 crore (US$ 7 billion) to boost localization of advanced components like electric motors and automatic transmissions, reducing imports and leveraging 'China Plus One’ trend.
Policy
Support
* 100% FDI is allowed under the automatic route for auto components sector.
* In January 2024, the Government of India approved additional fund of Rs. 1,500 crore (US$ 180.3 million) for second phase of FAME-II.
* The Bharat New Car Assessment Program (BNCAP) will not only strengthen the value chain of the auto component sector, but it will also drive the manufacturing of cutting-edge components, encourage innovation, and foster global excellence.
Competitive
Advantage
* A cost-effective manufacturing base keeps costs lower by 10-25% relative to operations in Europe and Latin America.
* India is the 2nd largest steel producer globally, thus has a cost advantage.
* India is emerging as a global auto component sourcing hub due to its proximity to key automotive markets such as ASEAN, Europe, Japan and Korea.
Introduction
The automotive components industry experienced a 11% YoY growth, reaching Rs. 3.32 lakh crore (US$ 38.4 billion) in the first half of FY25.
India has become the fastest-growing economy in the world in recent years. This fast growth, coupled with rising incomes, a boost in infrastructure spending and increased manufacturing incentives, has accelerated the automobile industry. The two-wheeler segment dominated the automobile industry because of the Indian middle class, with automobile sales standing at 23.85 million units in FY24.
Significant demand for automobiles also led to the emergence of more original equipment and auto components manufacturers. As a result, India developed expertise in automobiles and auto components, which helped boost international demand for Indian automobiles and auto components. Hence, the Indian automobile industry has a considerable impact on the auto component industry.
In 2024, India produced 100,000 electric cars and 900,000 electric two-wheelers. However, Internal Combustion Engine (ICE) vehicles still dominate with 20 million two-wheelers and 5 million cars produced.
India’s auto component industry is an important sector driving macroeconomic growth and employment. The industry comprises players of all sizes, from large corporations to micro entities, spread across clusters throughout the country. The auto components industry accounted for 2.3% of India’s GDP and provided direct employment to more than 1.5 million people. By 2026, the automobile component sector will contribute 5-7% of India's GDP. The Automotive Mission Plan (2016-26) projects to provide direct incremental employment to 3.2 million by 2026.
The industry is a leader in exports and provides jobs to over 3.7 crore people. In FY24, the export value of auto components/parts was estimated at US$ 21.2 billion. North America, which accounts for 33% of total exports, increased by 5%, while Europe and Asia, which account for 32% and 24% of total exports, increased by 12% and growth for Asia remained flat, respectively. The key export items included drive transmission and steering, engine components, body/chassis, suspension and braking etc.
Market Size
India’s auto components industry’s market share has significantly expanded, led by increasing demand for automobiles by the growing middle class and exports globally. Due to the demand for Indian auto components, several Indian and international players have entered the industry. India’s auto component industry is broadly classified into organised and unorganised sectors. While the unorganised sector consists of low-valued items and mostly serves the aftermarket category, the organised sector serves OEMs and includes high-value precision instruments.
The automobile component industry turnover stood at Rs. 6.14 lakh crore (US$ 74.1 billion) during FY24, registering a revenue growth of 9.8% as compared to FY23. Domestic OEM supplies contributed ~54% to the industry’s turnover, followed by domestic aftermarket (~10%) and exports (~18%), in FY24. The component sales to OEMs in the domestic market grew by 8.9% to Rs. 5.18 lakh crore (US$ 62.4 billion). The aftermarket for auto components grew by 10.0% during FY24 reaching Rs. 9.38 lakh crore (US$ 11.3 billion). Over FY16 to FY24, the automotive components industry registered a CAGR of 8.63%, reaching US$ 74.1 billion in FY24.
In FY25 (April-December), domestic sales of two-wheelers, passenger vehicles, commercial vehicles, three-wheelers, and amounted to 31,39,288, 6,83,471, 5,62,652 and 1,50,39,570 units, respectively.
Investments
The Indian automobile sector recorded an inflow of huge investments from domestic and foreign manufacturers. FDI inflow in the sector stood at Rs. 3,22,015 crore (US$ 37.21 billion) between April 2000-September 2024 which is around 5% of the total FDI inflows in India during the same period. Some of the recent investments made/planned for the auto component sector are as follows:
- As part of the Union Budget 2025-26, the government has announced duty exemptions on lithium-ion battery scrap and other essential minerals. This initiative also includes adding 35 capital goods for electric vehicle production to the exemption list, with the goal of enhancing domestic production.
- Craftsman Automation Ltd., a prominent producer of automotive and industrial components, has disclosed intentions to construct a state-of-the-art manufacturing facility within the SIPCOT Industrial Park in Shoolagiri, Hosur. The company is set to invest approximately Rs. 150 crore (US$ 17.3 million) in this strategic expansion project.
- A new plant for manufacturing automotive parts for BMW will be set up in Punjab.
- Accuron Technologies and Hyundai CRADLE have co-invested in Xnergy, a startup focused on developing contactless charging solutions for electric and autonomous vehicles.
- India and Uzbekistan signed a Bilateral Investment Treaty (BIT) to enhance investor confidence in both countries. FDI from India to Uzbekistan reached US$ 20 million from April 2000 to August 2024, with significant investments in pharmaceuticals, amusement parks, automobile components, and hospitality sectors.
- Honda R&D (India) Private Limited, has inaugurated its new Solution R&D Center in Bengaluru, Karnataka. The company has established a global objective to attain carbon neutrality across all its products and corporate activities by the year 2050.
- Apollo tires, which holds a 25% share of India's passenger-car radial segment in the aftermarket, aims to enhance its presence in rural areas across the country.
- Bharat Forge will invest Rs. 1,000 crore (US$ 119 million) over a period of five years in Tamil Nadu to enhance production capacity for the long term.
- In October 2023, Tata Motors signed a definitive agreement to acquire a 27% stake in Freight Tiger, a Software-as-a-Service (SaaS) company, for Rs. 150 crore (US$ 17.99 million).
- Auto components maker Happy Forgings to launch IPO on December 19th, 2023. It comprises a fresh equity issue of Rs. 400 crore (US$ 47.99 million) and an Offer For Sale (OFS) of 71.59 lakh shares.
- Ola Electric IPO was first auto company in India to launch an IPO in over two decades (20 years). It had and IPO size of Rs. 8,500 crore (US$ 1.01 billion).
- In August 2023, Bosch earmarks Rs. 480 crore (US$ 58.11 million) for R&D and an additional capex of Rs. 480 crore (US$ 58.11 million).
- In June 2023, Tata Motors will invest US$ 2 billion towards developing new products and platforms over the next four years.
- In May 2023, Apollo tires would be making an investment around Rs. 1,100 crore (US$ 133.17 million) in FY24.
- In May 2023, Gabriel India inks a pact with Inalfa, to invest Rs. 170 crore (US$ 20.58 million) to set up a new manufacturing facility. Inalfa Gabriel Sunroof Systems (IGSS), in Chennai which will become operational in the first quarter of 2024.
- In May 2023, With Tesla proposing a manufacturing plant in India, the government plans to come out with a modified Production-Linked Incentive scheme (PLI 2.0) for electric vehicles and advanced chemistry cell batteries to invite fresh investments.
- In May 2023, Bridgestone looks to expand its retail footprint in India by 20-25%.
- In May 2023, Tata Technologies on Monday announced a partnership with TiHAN IIT Hyderabad, to collaborate in the areas of Software Defined Vehicles (SDV) and Advanced Driver Assistance Systems (ADAS) that incorporate the latest technologies.
- In April 2023, GreenCell Mobility invested US$ 181.59 million to double EV buses supply in India.
- By 2030, Chinese EV manufacturer BYD hopes to control 40% of the Indian EV market. It already has a manufacturing setup in India, and the current plant's capacity may be increased by another 10,000-15000 units.
- In 2022-23, Tamil Nadu attracted investment proposals worth Rs. 18,063 crore (US$ 2.20 billion) Tamil Nadu is capitalizing on its previous automotive expertise to enter the EV industry.
- In February 2023, Bridgestone India, a global leader in tires and sustainable mobility solutions, announced that it would be investing over US$ 73.39 million (Rs. 600 crore) to meet the increasing demand for quality passenger tyres in the country.
- In January 2023, NXP Semiconductors inaugurated a new state-of-the-art Systems & Silicon Innovation lab at NXP Semiconductors Campus in Manyata Tech Park, Bengaluru.
- In 2022, the Ministry of Road Transport and Highways mandated that all vehicles must be equipped with a driver airbag in accordance with Automotive Industry Standard (AIS) 145.
- In November 2022, Continental Tires, a leading premium tyre manufacturer inaugurates Its First Commercial Vehicle Alignment Center in Jaipur.
- In November 2022, auto components maker Sona BLW precision forgings ltd. announced its plans to increase capex by Rs. 1,000 crore (US$ 123.28 million) for its electric vehicles business.
- In March 2022, Minister of State for Power and Heavy Industries Mr. Krishan Pal Gurjar, said that Indian and foreign automobile manufacturers have taken initiatives to develop hydrogen fuel cell vehicles.
- In June 2022, German auto component major ZF inaugurated and expanded its new tech centre in India.
- In January 2022, e-bike maker Emotorad announced plans to raise US$ 25 million to expand in the US markets.
Government Initiatives
The Government has reaffirmed its commitment towards EVs and its mission for 30% electric mobility by 2030. Budget announced customs duty exemption on the import of capital goods and machinery required for the manufacture of lithium-ion batteries that typically power EVs.
The Bharat New Car Assessment Program (BNCAP) will not only strengthen the value chain of the auto component sector, but it will also drive the manufacturing of cutting-edge components, encourage innovation, and foster global excellence.
The FAME Scheme was extended for a further period of 2 years up to 31st March 2024.
The Government of India’s Automotive Mission Plan (AMP) 2006-26 has been instrumental in ensuring growth for the sector. The Indian automobile industry is expected to achieve a turnover of US$ 300 billion by 2026 by expanding at a CAGR of 15% from its current revenue of US$ 74 billion.
In September 2021, the Indian government issued notification regarding a PLI scheme for automobile and auto components worth Rs. 25,938 crore (US$ 3.49 billion). In February 2022, the government received investment proposals worth Rs. 45,016 crore (US$ 6.04 billion) from 20 automotive companies under the PLI Auto scheme. This scheme is expected to create an incremental output of Rs. 2,31,500 crore (US$ 31.08 billion).
The government’s AMP 2016-26 will help the automotive industry grow and will benefit the economy in the following ways:
- The auto industry’s GDP contribution will rise to over 12%.
- Additional ~65 million direct and indirect jobs will be created.
- End-of-life policy will be implemented for old vehicles.
Road Ahead
The rapidly globalising world is creating newer opportunities for the transportation industry, especially while shifting towards electric, electronic and hybrid cars, which are deemed more efficient, safe and reliable modes of transportation. Over the next decade, this will lead to newer verticals and opportunities for auto component manufacturers. To help them adjust to the shifting dynamics of the sector, the Indian government has already offered various production incentives. India is also investing heavily in electric car infrastructure.
Manufacturers in this industry are focusing on developing sustainable solutions, lightweight materials, and efficient production processes to meet the evolving needs of the automotive sector. Additionally, there is a growing emphasis on digitalization and data analytics to optimize operations and enhance product performance.
As the automotive industry continues to evolve, the auto components sector will play a crucial role in shaping the future of mobility. Collaboration with automakers, investment in research and development, and adaptation to changing regulations will be key factors for success in this dynamic and competitive market.
According to ICRA, the domestic Passenger Vehicle (PV) market is expected to expand by six to nine percent in the current fiscal year compared to the previous year.
The number of charging stations stood at 1,800 in March 2021 and is expected to reach 4 lakh by 2026. This would make it easier for the auto component industry to take advantage of the EV opportunity and expertise in EV components manufacturing, thus helping India on a global scale. The Indian government is exempting imports of capital goods and machinery essential to produce lithium-ion cells used in EV batteries from customs duty. This, coupled with the shift in global supply chains, will help the Indian global automotive component trade to expand 4-5% yearly to US$ 80 billion by 2026. Moreover, the Indian auto component industry is the third largest in the world.
References: International Organization of Motor Vehicle Manufacturers, Media Reports, Press Releases, Department for Promotion of Industry and Internal Trade, Automotive Component Manufacturers Association of India, Society of Indian Automobile Manufacturers
Note: Conversion rate used in January 2025, Rs. 1 = US$ 0.012, * - Includes automobile and auto components, E - Estimated
Related News
MOREAuto Component Clusters
- Maharashtra
- Tamil Nadu
- National Capital Region(NCR)
- Gujarat
- Madhya Pradesh
Posters
MORE
COMPONENTS OF QUALITY
India is emerging as the world's hub of choice when it comes to manufacturing quality auto components. The industry has over 600 manufacturers who exceed the world's most stringent quality standard.
IBEF Campaigns
MORE
Aatmanirbhar Bharat Utsav 2024
Union Minister of External Affairs, Dr. S. Jaishankar and Union Commerce an...
Case Studies
MOREUnlocking Play: Evolution of India’s Toy Sector
The history of toy-making in India is extensive and varied, spanning thousands of years. Terracotta figurines, wheeled carts, and animal-shaped toys t...
Shaping the Future: How PM Ujjwala Yojana is Addressing India's Energy Needs
India, with its large population and diverse socio-economic conditions, has long struggled to ensure clean and affordable energy access for all, espec...
India's Electronics Sector: Pathway to Global Value Chain Integration
Electronics manufacturing plays an essential role in the global supply chain, fuelling everything from electric cars on the road to smartphones in our...
IBEF BLOG
MORE
Seaweed and the Blue Economy: India's Path to Coastal Prosperity
Seaweed, a highly versatile marine resource, holds significant potential fo...
From Fields to Fuel: The Indian Sugar Industry’s Role in Advancing Ethanol Blending
The Indian sugar industry is undergoing a transformation as it embraces eth...
Revolutionising India's Edible Oil Sector: Pathways to Sustainable Growth
India ranks fourth in the world after the United States, China, and Brazil ...
Partners
