Auto Components Industry in India

The Indian auto components industry is expected to grow to US$ 200 billion by FY26

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 are expected to grow and reach US$ 30 billion in FY26.

* 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.

* Production Linked Incentive (PLI) schemes on automobile and auto components are expected to bring a capex of Rs. 74,850 crore (US$ 9.58 billion) in the next five years.

* 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.

Snapshot Showcase Infographics Reports

Last updated: Jul, 2024

Auto Components Industry Report

May, 2024

Introduction

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.

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 en tities, 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. From FY16-FY22, the industry registered a CAGR of 6.35% and was valued at US$ 56.50 billion in FY22. In 2023-24 (April-September), the export value of auto components/parts was estimated at US$ 10.4 billion. North America, which accounts for 33% of total exports, increased by 2%, while Europe and Asia, which account for 33% and 24% of total exports, increased by 12% and declined by 4%, respectively. The key export items included drive transmission and steering, engine components, body/chassis, suspension and braking etc.

Due to the high development prospects in all vehicle industry segments, the auto component sector is expected to see double-digit growth in FY22. The industry is expected to stand at US$ 200 billion by FY26.

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 Oz670 growth in 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. 2.9 lakh crore (US$ 36.1 billion) in H1 2023-24 the industry had revenue growth of 12.6% as compared to H1 2022-23. Domestic OEM supplies contributed ~66% to the industry’s turnover, followed by domestic aftermarket (~12%) and exports (~22.3%), in FY23. The component sales to OEMs in the domestic market grew by 13.9% to Rs. 2.54 lakh crore (US$ 30.57 billion). In H1 2023-24, exports of auto components grew by 2.7% to Rs. 85,870 crore (US$ 10.4 billion). The aftermarket for auto components grew by 7.5% in H1 2023-24 reaching Rs. 45,158 crore (US$ 5.5 billion).

As per the Automobile Component Manufacturers Association (ACMA) forecast, auto component exports from India are expected to reach US$ 30 billion by 2026. The auto component industry is projected to record US$ 200 billion in revenue by 2026. Strong international demand and resurgence in the local original equipment and aftermarket segments are predicted to help the auto component industry grow 20-23% in FY22.

In fiscal year 2023-24 (April-January), the total number of automobiles sold was 19.72 million units. In (April-January) 2023-24, the total production of passenger vehicles, commercial vehicles, three-wheelers, two-wheelers, and quadricycles was 23.36 million units.

Investments

The Indian automobile sector recorded an inflow of huge investments from domestic and foreign manufacturers. FDI inflow in the sector stood at US$ 35.65 billion between April 2000-December2023 which is around 5.35% 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:

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 to be the first auto company in India to launch an IPO in over two decades (20 years). It has an expected 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 tyres 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 tyres 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.
In December 2021, Exponent Energy, an Electric Vehicle (EV) start-up, secured a pre-series funding of US$ 5 million.
In December 2021, India’s leading automobile platform CarTrade Tech invested US$ 100 million for a new acquisition and to accelerate growth.
In October 2021, Lucas TVS announced a 20% capacity expansion of its auto and non-auto businesses by the end of 2021.
In October 2021, Hero Motor formed a joint venture with Japanese two-wheeler major Yamaha to manufacture electric motors for e-bicycles for the global market.
In October 2021, the Maharashtra government signed an MoU with Causis E-Mobility Pvt. Ltd., a joint venture of UK-based Causis Group, to set up a zero-emission EV manufacturing facility at Talegaon, near Pune, with an investment of Rs. 2,800 crore (US$ 317.96 million).
In October 2021, Sona BLW Precision Forgings Limited, through its wholly owned subsidiary Sona Comstar eDrive Private Limited (Sona Comstar), entered a collaboration agreement with Israel's IRP Nexus Group Ltd. to develop, manufacture and supply magnetless drive motors and matching controller systems for electric two- and three-wheelers.
In October 2021, auto component manufacturer MM Forgings Ltd. (MMF) acquired CAFOMA Autoparts for Rs. 33 crore (US$ 4.38 million).
In October 2021, TVS Motor Company, collaborated with Tata Power, to boost the comprehensive implementation of Electric Vehicle Charging Infrastructure (EVCI) across India and deploy solar-powered technologies at various TVS Motor locations.
At the Investment Conclave - 2021 in Chennai, the Tamil Nadu government stated that it received investment commitments totalling Rs. 28,508 crore (US$ 3.85 billion) from 49 companies. Electronics, automotive components, industrial parks, information technology and manufacturing are some of the sectors where these investments are expected to generate about 83,482 jobs in the state.
The Indian government has outlined US$ 7.8 billion for the automobile and auto component sector in Production-Linked Incentive (PLI) schemes under the Department of Heavy Industries.
In May 2021, the Government of India approved a PLI scheme for manufacturing advanced chemistry cell batteries at an estimated outlay of Rs. 18,100 crore (US$ 247.3 million).
In March 2021, the government announced plans to offer fresh incentives to companies manufacturing EVs as part of a broad auto sector scheme. The scheme is expected to attract US$ 14 billion of investment in the next five years.
In February 2021, Vedanta Resources launched its newest product — aluminium cylinder head alloy — a crucial raw material for manufacturing cylinder heads and other automotive components.
A cumulative investment of around Rs. 12.5 trillion (US$ 180 billion) in vehicle production and charging infrastructure would be required until 2030 to achieve India’s EV ambitions. This is likely to boost demand for auto components from local manufacturers.
In January 2021, Suzuki Motor Corp. and Hyundai Motor Co. announced plans to explore ways to make India a key global hub for sourcing components and enable a sharp rise in vehicle exports from the country.
In January 2021, French battery system supplier Forsee Power pledged to invest Rs. 82 crore (US$ 11.18 million) in phase 1 of the India project.

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 November 2020, the Union Cabinet approved a PLI scheme in automobile and auto components with an approved financial outlay over a five-year period of Rs. 57,042 crore (US$ 8.1 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 an investment proposal 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. In concrete numbers, the PV sector is projected to achieve sales of 4.2 million units in the ongoing financial year.

In December 2020, Power PSU JV EESL announced a plan to install about 500 EV charging stations in the country. 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 April 2024, Rs. 1 = US$ 0.012, * - Includes automobile and auto components, E - Estimated