Advantage India
Robust
Demand
*Growing working population and expanding middle class are expected to remain the key demand drivers.
*India is the world’s third-largest automobile market by both value and volume.
*By 2030, ten million EVs could be sold each year. The EV market is expected to reach US$ 206 billion by 2030.
*India’s auto-component industry is poised to reach US$ 200 billion by 2030, supported by its cost competitiveness, skilled workforce, and growing domestic demand, according to a McKinsey report titled Shaping the future of India’s auto component industry.
Export
Opportunities
*India is emerging as a global hub for auto component sourcing and the industry exports over 25% of its production annually.
*Exports of auto components rose by 8%, reaching Rs. 1,95,726 crore (US$ 22.90 billion) in FY25, up from Rs. 1,81,196 crore (US$ 21.20 billion) in FY24.
*According to a McKinsey report, India's auto component exports are projected to reach US$ 70-100 billion by FY30, driven by rising demand for electric vehicle (EV) technologies and global supply chain diversification. Indian SMEs could capture US$ 20-30 billion of this opportunity by leveraging cost advantages and high-quality standards.
Policy
Support
*The Union Cabinet approved the Production Linked Incentive (PLI) Scheme for the Automobile and Auto Components sector on September 15, 2021, with a budgetary outlay of Rs. 25,938 crore (US$ 3.03 billion) from FY23 to FY27. The scheme is expected to attract fresh investments of over Rs. 42,500 crore (US$ 4.9 billion) during this period.
*The Indian automobile sector saw transformative growth in 2025 driven by GST cuts on small cars (from 28% to 18%), expanded low-GST EV portfolios (5%), and government EV incentives promoting local manufacturing and global OEM entry. The Production Linked Incentive (PLI) scheme is boosting investments in advanced automotive technologies and supply chain localization.
Competitive
Advantage
* A cost-effective manufacturing base in India keeps costs lower by 10-25% relative to operations in Europe and Latin America.
* India's Automotive Mission Plan 2047 aims to boost vehicle production to 50 million by 2030 and 200 million by 2047, positioning India among the top two global auto producers. It prioritizes sustainable vehicle production with hydrogen, electric, CNG, and biogas, while not curbing petrol or diesel vehicles immediately.
* Second-largest steel producer globally, hence 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
India has emerged as the fastest-growing economy in the world in recent years. Rising incomes, higher infrastructure spending, and supportive manufacturing incentives have together accelerated the automobile sector, making it a critical pillar of India’s growth story. The two-wheeler segment, driven largely by the expanding middle class, continues to dominate the market, with sales reaching 19.6 million units in FY25. This surge in demand has also encouraged the expansion of original equipment and auto component manufacturers, helping India build strong expertise in this space and enhancing global demand for Indian vehicles and components.
The industry is now witnessing a shift towards electrification, though internal combustion engine (ICE) vehicles continue to dominate. In 2024, India produced 100,000 electric cars and 900,000 electric two-wheelers, alongside 20 million two-wheelers and 5 million cars powered by ICE technology. Supporting this growth, the auto component industry has become a vital segment of the economy, spanning large corporations to micro enterprises across manufacturing clusters nationwide. It accounted for 2.3% of India’s GDP in FY25 and provided direct employment to over 1.5
million people, a figure expected to rise as the sector’s GDP contribution reaches 5-7% by 2026. India’s auto-component industry is poised to reach US$ 200 billion by 2030, supported by its cost competitiveness, skilled workforce, and growing domestic demand, according to a McKinsey report titled Shaping the future of India’s auto component industry.
The Indian auto component industry recorded a turnover of Rs. 6,73,000 crore (US$ 78.74 billion) in FY25, registering a CAGR of 14% between FY20 and FY25. The sector is projected to achieve exports worth Rs. 8,54,700 crore (US$ 100 billion) by 2030, underscoring its global competitiveness. In FY25, exports stood at Rs. 1,95,726 crore (US$ 22.9 billion). North America remained the largest export destination with a 32% share, recording 8.4% growth, while Europe, with a 29.5% share, registered a 2.1% decline. Asia accounted for 26% of exports and witnessed robust growth of 15.1%. The key export items included drive transmission and steering, engine components, body and chassis parts, suspension systems, and braking components. According to a McKinsey report, India's auto component exports are projected to reach US$ 70-100 billion by FY30, driven by rising demand for electric vehicle (EV) technologies and global supply chain diversification. Indian SMEs could capture US$ 20-30 billion of this opportunity by leveraging cost advantages and high-quality standards.
Market Size
India’s auto components industry has significantly expanded its market share, driven by rising automobile demand from the growing middle class and strong global exports. The sector has attracted both Indian and international players and is broadly classified into organised and unorganised segments. While the unorganised sector primarily caters to the aftermarket with low-value items, the organised sector focuses on supplying high-value precision instruments to Original Equipment Manufacturers (OEMs).
India’s automobile production further highlights the scale of demand that supports the component industry. In FY26 (April-September), domestic sales stood at 1,02,36,639 units for two-wheelers, 20,51,082 units for passenger vehicles, 4,63,502 units for commercial vehicles, and 3,94,450 units for three-wheelers. In FY26 (April-September), the total production of Passenger Vehicles, Commercial Vehicles, Three Wheelers, Two Wheelers and Quadricycle was 1,65,34,997 units.
In FY25, domestic OEM supplies accounted for about 54% of the industry’s turnover, followed by the domestic aftermarket at around 10% and exports at 19%. Supplies to OEMs stood at Rs. 5,70,000 crore (US$ 66.69 billion), reflecting a 10% YoY growth,
while the aftermarket segment was valued at Rs. 99,948 crore (US$ 11.6 billion), recording a 6% increase over FY24. India's Automotive Mission Plan 2047 aims to boost vehicle production to 50 million by 2030 and 200 million by 2047, positioning India among the top two global auto producers. It prioritizes sustainable vehicle production with hydrogen, electric, CNG, and biogas, while not curbing petrol or diesel vehicles immediately.
Investments
The Indian automobile sector recorded an inflow of huge investments from domestic and foreign manufacturers. Foreign Direct Investment (FDI) inflow in the sector stood at Rs. 2,59,753.31 crore (US$ 39.14 billion) between April 2000-June 2026 which is 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:
- Auto components maker Carraro got listed on BSE and NSE on December 2024, and the IPO comprised entirely an OFS of 1.78 crore shares.
- Inalfa Gabriel Sunroof Systems (IGSS) opened a new plant in Chennai which became operational in Q1 2024 is now nearing its full capacity and produced 1,30,000 sunroofs in 2024 alone.
- India’s auto component industry is expected to attract Rs. 25,000-30,000 crore (US$ 2.89-3.46 billion) in FY26 for capacity expansion and EV part localisation, following an estimated investment of Rs. 15,000-20,000 crore (US$ 1.73-2.31 billion) in FY25.
- 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 the 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.
- 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.
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 Union Cabinet approved the Production Linked Incentive (PLI) Scheme for the Automobile and Auto Components sector on September 15, 2021, with a budgetary outlay of Rs. 25,938 crore (US$ 3.03 billion) from FY23 to FY27. The scheme is expected to attract fresh investments of over Rs. 42,500 crore (US$ 4.9 billion) during this period.
The Bharat New Car Assessment Program (BNCAP) will boost the auto component value chain by driving advanced manufacturing, fostering innovation, and promoting global standards.
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.
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 new opportunities for the transportation industry, particularly with the shift towards electric, electronic, and hybrid vehicles that are seen as more efficient, safe, and reliable. Over the next decade, this transition will open new verticals for auto component manufacturers, supported by strong government policy measures. The Indian government has already introduced production incentives and is investing heavily in electric vehicle (EV) infrastructure, including the exemption of customs duties on capital goods and machinery used for producing lithium-ion cells.
The EV ecosystem is expected to expand rapidly, with the number of charging stations projected to rise from 12,146 in February 2024 to 4 lakh by 2026. This will enable the auto component industry to strengthen its capabilities in EV components manufacturing, positioning India as a global hub for clean mobility solutions. As global supply chains realign, India’s automotive component trade is expected to expand 4-5% annually to reach US$ 80 billion by 2026.
At the same time, manufacturers are increasingly focusing on sustainable solutions, lightweight materials, and efficient production processes to meet the evolving needs of the automotive sector. The integration of digitalisation and data analytics is also
becoming a priority to optimise operations and enhance product performance. Going forward, collaboration with automakers, continuous investment in research and development, and adaptation to changing regulations will be critical for the industry to stay competitive. With these shifts, the Indian auto component sector is set to play a pivotal role in shaping the future of mobility, reinforcing India’s position as the world’s third-largest automobile market by both value and volume.
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 October 2025 is Rs. 1 = US$ 0.012
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
MOREThe Evolution of Quick Commerce in India: A Sectoral Analysis
Indian retail has undergone a dramatic shift over the past few years. Not too long ago, urban Indians stocked up on groceries and daily essentials wit...
Tiles of Transformation: Exploring India’s Ceramic Tile Industry
India’s ceramic tile sector is one of the country’s brightest manufacturing success stars. Transforming from humble pottery clusters, it h...
Styling India’s Growth: The Indian Salon Landscape
India’s beauty salon market is now undergoing a very radical makeover of its own. Earlier considered by many merely a seasonal trip for wedding ...
IBEF BLOG
MORE
India's Developer Boom: Building the Future with AI and Innovation
India's developer community has reached an inflection point. With 17 mi...
IndiaAI Mission: Democratizing access to AI compute
The world is experiencing an intelligence revolution driven by artificial i...
Growing Power of India’s DIIs
India’s equity markets are experiencing a major structural shift. Dom...
Partners
