EXECUTIVE SUMMARY
India's auto component industry recorded an aggregate turnover of US$ 80.20 billion in FY25, growing at a CAGR of 8.32% between FY16 and FY25. Exports reached US$ 22.90 billion and the aftermarket US$ 11.77 billion in FY25, and the industry is poised to reach US$ 200 billion by 2030.
Turnover (FY25)
US$ 80.20 Billion
Turnover CAGR (FY16-FY25)
8.32%
Exports (FY25)
US$ 22.90 Billion
Aftermarket (FY25)
US$ 11.77 Billion
Introduction
The Indian automotive components sector forms an essential part of the manufacturing sector of India, and it serves both the local vehicle production and global supply chains. The sector is known for its cost competitiveness, skilled workforce and strong engineering capabilities, the industry manufactures a variety of components, including those used in engines, transmissions, and electronics. The Automotive Component Manufacturers Association of India (ACMA) classifies its products into the following categories: engine components, electrical components, drive transmission and steering components, suspension and braking components, and auxiliary equipment like lights, wipers and instrument panels.
The industry depends on an extensive automotive platform. In India, the auto industry contributes 49% towards manufacturing Gross Domestic Product (GDP) and 6% to GDP, while generating more than 30 million employment opportunities. India ranks first in the production of tractors, the second in the production of buses, and the third in the production of heavy trucks, with vehicle production of 34.71 million units produced in FY26. The number of vehicles stands at approximately 333 million units and is expected to rise to 430-435 million units by 2030.
The industry not only provides new automobiles but also supports a substantial replacement business. The automotive aftermarket consists of parts used in engines, suspension and brakes, transmissions, rubber parts, cooling systems, filters, tyres, and other consumable parts like batteries, coolants, and lubricants. With the increasing popularity of electric vehicles (EVs) and localisation, the automotive industry is changing at a fast pace.
MARKET SIZE AND GROWTH
- Aggregate turnover grew from US$ 39.05 billion in FY16 to US$ 80.20 billion in FY25 (US$ 74.10 billion in FY24), recording an 8.32% CAGR.
- The turnover in H1 FY26 stood at Rs. 3,56,193 crore (US$ 41.20 billion) registering an increase of 6.80% compared to the previous year, wherein domestic Original Equipment Manufacturer (OEM) supplies accounted for Rs. 3,04,663 crore (US$ 35.20 billion) with an increase of about 7.30%, while the aftermarket turnover stood at Rs. 53,160 crore (US$ 6.10 billion), up about 9%.
- The exports were up by 8%, reaching Rs. 1,95,726 crore (US$ 22.90 billion) during FY25 and increased by 9.30%, reaching US$ 12.20 billion in the first half of FY26, while the imports totaled US$ 12.30 billion. The aftermarket increased by 6.29%, reaching Rs. 99,498 crore (US$ 11.77 billion) during FY25.
- The market is expected to grow to US$ 200 billion by 2030 as per a McKinsey study.
KEY SEGMENTS
The industry has three distribution channels: domestic OEM supply, the domestic aftermarket and exports. Its products fall into five broad segments.
- In FY25, components sold to OEMs included engine components (26%), suspension and braking (15%), body and chassis (14%), drive transmission and steering (13%), and electricals and electronics (12%).
- The domestic aftermarket will record a 6% CAGR and reach US$ 16 billion by 2030, with passenger vehicles and commercial vehicles having US$ 5 billion each, two-wheelers and three-wheelers having US$ 4 billion, and tractors having US$ 2 billion.
INVESTMENTS AND FDI
- The amount of FDI flow into the automobiles industry in the period of April 2000 to March 2026 was Rs. 2,70,230 crore (US$ 40.31 billion), which accounted for 5% of the total FDI flows in India, and 100% FDI is permitted in the auto components segment through the automatic route.
- By FY28, the automobile sector is aiming to make an investment of Rs. 58,000 crore (approximately US$ 7 billion) for the production of high-end components such as electric motors and automatic transmission gearboxes.
- In January 2026, Maruti Suzuki announced an investment of US$ 3.90 billion for a new plant coming up in Gujarat with an additional production capacity of 1 million units, whereas Toyota Kirloskar Motor is investing Rs. 25,000 crore (US$ 3.00 billion) on a plant in Maharashtra, which will create 24,000 employment opportunities.
GOVERNMENT INITIATIVES
- Production Linked Incentive (PLI) Scheme for Automobiles and Auto Components: Approved on September 15, 2021 with an outlay of Rs. 25,938 crore (US$ 3.49 billion) for 2022-23 to 2026-27; it attracted Rs. 35,657 crore (US$ 4.03 billion) in investments and 48,974 jobs until September 2025.
- Union Budget FY27: Rs. 5,940 crore (US$ 672.17 million) for the PLI Scheme, double the FY26 allocation.
- PM Electric Drive Revolution in Innovative Vehicle Enhancement (E-DRIVE) Scheme: US$ 1.30 billion to subsidise electric and hybrid vehicle purchases.
- Component modernisation fund: US$ 200 million for interest subsidy on loans and investments in new plants and equipment. • FAME Scheme Phase II: Additional Rs. 1,500 crore (US$ 180.30 million) approved in January 2024, after Rs. 800 crore (US$ 97.85 million) for 7,432 charging stations.
- GST cuts: Tax on EVs lowered from 12% to 5%, and on EV chargers and charging stations from 18% to 5%.
- National Automotive Testing and R&D Infrastructure Project (NATRiP): Set up at a cost of US$ 388.50 million to help industry adopt global performance standards.
- Automotive Mission Plan 2047: Targets vehicle production of 50 million units by 2030 and 200 million by 2047.
DRIVERS AND OPPORTUNITIES
- Demand for EVs - Sales of EVs have increased to 2.66 million units in FY26 from 2.05 million in FY25 (29.76% growth, compared to 22.02% in FY25) and reached 8,67,491 units in Q1 FY27, while the ambition of 30% EV penetration target by 2030 is expected to boost the demand for batteries and power electronics and electric drivetrains.
- Cost and labour advantage - Manufacturing cost of products in India is 10-25% lesser than in Europe and Latin America, India is the second-largest steel producer, and around 68% of its population is of working age (approximately 875 million).
- Export potential - The sector is exporting more than 25% of its output annually, and exports are expected to reach US$ 70-100 billion by FY30 due to increasing demand for EV technology globally.
- Trade access - The India-UK Free Trade Agreement was implemented from July 15, 2026, and through CETA, India gets duty-free access for 99% of its exports to the UK, which include auto parts.
- Opportunities for product sales - The need for replacements for clutch, shock absorbers, and brakes will increase in line with traffic density, while battery manufacturing firms like Exide and Amara Raja Batteries will manufacture lithium-ion batteries.
STRATEGIES
- Product development - Sundaram Clayton expanded its EV component development in January 2026, particularly aluminium die-casting, which would help reduce weight in vehicles. Lucas TVS had started to develop more components for EVs in 2025 with Brushless Direct Current motor (BLDC) and Permanent Magnet Synchronous Motor (PMSM) controllers.
- Capacity expansion - Craftsman Automation is setting up a Rs. 150 crore (US$ 17.30 million) facility in Hosur, while Apollo Tyres announced capital expenditure of Rs. 1,500 crore (US$ 175 million) in July 2025 to increase passenger car radial capacity in Hungary and Andhra Pradesh.
- Diversification - Those organisations focusing on manufacturing only one single type of product have begun to venture into two-wheelers, passenger cars, or commercial vehicles, whereas suppliers of components are looking at unexplored Northeastern markets.
- Capital raising - Automotive components firms are raising capital through the stock market; Carraro made its debut on the bourses in December 2024 through an Initial Public Offering (IPO) comprising an Offer for Sale (OFS) of 1.78 crore shares.
M&A
- In February 2026, JS Auto Cast Foundry India, a unit of Bharat Forge, secured Rs. 300 crore (US$ 33.95 million) from Premji Invest, which would take a 23% stake on a fully diluted basis.
- Carlyle Group is planning a US$ 400 million fund for acquiring auto components firms in India.
- In May 2024, the Motherson Group purchased AD Industries to strengthen its aerospace and health and medical competencies.
- In July 2023, Samvardhana Motherson committed to acquire an 81% ownership in Yachiyo Industry, a Honda Motor subsidiary.
TRENDS
- Sourcing hub for global manufacturers - Major global OEMs have designated India as the sourcing hub for components, global Tier-I suppliers are planning on increasing their sourcing through their Indian subsidiaries, and the localisation ratio in India’s automobile industry stands at around 78%.
- Supply chain diversification - The Economic Survey 2025-26 highlighted friendshoring on January 29, 2026, as global companies move towards diversification in their supply chains from geographies like China to others like India.
- EV manufacturing shift - Tamil Nadu produces 70% of the EV two-wheelers made in India, with an annual production capacity of 10 million units, and BYD aims to capture 40% of the Indian EV market in India by 2030.
- Software Defined Vehicles - In May 2023, Tata Technologies collaborated with TiHAN IIT Hyderabad on software defined vehicles and advanced driver assistance systems.
RECENT DEVELOPMENTS
- July 2026: Samvardhana Motherson welcomed Autoelectric, strengthening its global capabilities in automotive wiring harness solutions.
- Q1 FY27: Fasteners reported a rise in consolidated net profit to Rs. 168.69 crore (US$ 17.78 million).
- February 2026: Mahindra & Mahindra announced an investment of US$ 1.65 billion in an integrated automobile and component manufacturing facility in Maharashtra, including EV powertrain production.
- January 2026: Tata AutoComp Systems inaugurated two advanced manufacturing facilities in Sanand, Gujarat.
- January 2026: Tata Elxsi partnered with Autolink at CES 2026 to accelerate SDV adoption through intelligent cockpit systems and integrated vehicle software.
- November 2025: Tenneco Clean Air India listed after an IPO raising around Rs. 3,600 crore (US$ 425.73 million).
FAQs
The auto component industry in India manufactures parts such as engines, transmissions, braking systems, electricals, electronics, and body components for automobiles. It is a key part of the automotive value chain, supplying both OEMs and the aftermarket.
India's auto component industry is expanding due to rising vehicle production, growing domestic demand, increasing exports, and investments in advanced manufacturing. Government incentives and the shift towards electric mobility are further accelerating industry growth.
The Indian auto component industry manufactures engine components, suspension and braking systems, drive transmission and steering systems, electrical and electronic parts, body and chassis components, and EV-specific parts for domestic and global markets.
The auto component industry supplies critical components to vehicle manufacturers, ensuring efficient production across passenger vehicles, commercial vehicles, two-wheelers, and EVs. It also supports innovation, localisation, and a strong automotive supply chain.
Exports are a major growth driver for the auto component industry in India, with North America, Europe, and Asia being key markets. Rising global demand and supply chain diversification are strengthening India's position as a reliable export hub.
The transition to electric vehicles is creating new opportunities for the Indian auto component industry in batteries, power electronics, lightweight components, and advanced manufacturing. It is also driving investments in localisation and EV-focused technologies.
The Government supports the auto component sector in India through initiatives such as the PLI Scheme, PM E-DRIVE Scheme, Automotive Mission Plan, and customs duty exemptions for EV manufacturing, encouraging investment, localisation, and innovation.
The future of the auto component industry in India is driven by electric mobility, export growth, digital manufacturing, supply chain diversification, and increasing demand for high-value automotive components in domestic and international markets.
India's auto component industry benefits from a cost-competitive manufacturing base, skilled workforce, strong OEM ecosystem, and expanding export network. Rising investments and policy support continue to strengthen India's position in the global automotive supply chain.
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