India’s auto component industry is set to witness a surge in investments, with Rs. 25,000-30,000 crore (US$ 2.89-3.46 billion) projected for the next financial year (FY25-26). According to ICRA, a prominent credit rating agency, the industry will direct these funds towards capacity expansion, localization, and the development of electric vehicle (EV) components. This marks a strategic shift towards sustainable mobility solutions and enhanced manufacturing capabilities, focusing on product development, advanced technology, and regulatory compliance in a rapidly evolving automotive landscape.

The Indian auto component industry plays a critical role in India’s automotive sector, contributing significantly to the country’s economy. Represented by 46 major companies, the sector achieved annual revenues exceeding Rs. 3,00,000 crore (US$ 34.63 billion) in FY24. With a strong outlook for growth, industry experts predict investment levels of Rs. 15,000-20,000 crore (US$ 1.73-2.31 billion) for FY25, with another ₹25,000-30,000 crore (US$ 2.89-3.46 billion) expected in FY26.

Investments and Focus Areas

The focus of these investments will be on new product development, including a significant push towards electric vehicle (EV) components, which are poised to become a key driver of growth in the coming years. India’s auto industry is increasingly focused on localizing production, which not only strengthens domestic capabilities but also aligns with the country’s push for self-reliance in manufacturing critical components for the EV market.

The automotive sector's demand from domestic Original Equipment Manufacturers (OEMs) contributes to more than half of the industry revenues, driving a large portion of these investments. As the automotive industry gears up to meet future demands, these investments will help auto component firms scale up their operations, enhance technological capabilities, and ensure compliance with upcoming regulatory changes.

Replacement Market Growth

Apart from OEM demand, the auto component industry is also expected to see moderate growth in the replacement market. With an increasing number of vehicles on the road and a higher average vehicle age, the demand for replacement parts is expected to rise by 5-7% in FY25 and 7-9% in FY26. This shift towards preventive maintenance and the growing preference for organized spare parts is expected to fuel consistent growth in the replacement parts segment.

As the vehicle fleet in India continues to expand, the replacement market is likely to benefit from increased demand for genuine spare parts. The trend of vehicle longevity coupled with higher awareness of maintenance needs is contributing to the overall demand for quality spare parts in India’s automotive market.

Export Market and Global Prospects

Exports, which account for nearly 30% of industry revenues, may face some challenges due to sluggish growth in vehicle registrations across key global markets. However, Indian auto component suppliers are well-positioned to benefit from vendor diversification initiatives by global OEMs and Tier-I suppliers. These initiatives are driving higher outsourcing and increased supply to new platforms, opening up fresh avenues for exports. As a result, Indian suppliers are likely to see long-term growth opportunities, especially with global OEMs seeking to diversify their supply chains and partner with cost-effective and reliable suppliers in India.

This shift towards vendor diversification and increased outsourcing will help Indian auto component manufacturers tap into new markets, driving demand for their products globally. The focus on technological advancements and quality manufacturing will further boost India's position in the global supply chain, enhancing the sector’s export prospects.

The Road Ahead

The Indian auto component sector stands at a significant crossroads, with substantial investments slated for the next two years, focusing on EV components, advanced manufacturing, and the growing replacement market. While the domestic market is poised for growth, exports will likely remain a strong pillar of the sector’s long-term success.

As global OEMs look to diversify their supply chains and seek out reliable, cost-effective partners, Indian suppliers are well-positioned to capture a larger share of the global automotive parts market. The sector’s ability to invest in advanced technologies and sustainable mobility solutions will play a key role in ensuring continued growth and global competitiveness.

Conclusion

The Indian auto component industry is set for significant growth and transformation, driven by investments of ₹25,000-30,000 crore (US$ 2.89-3.46 billion) in FY25-26. The industry's focus on localization, electric vehicle (EV) parts, and technological advancements will not only boost domestic production but also strengthen India’s position as a key player in the global automotive supply chain. With increasing demand from OEMs and a growing replacement market, the future of India’s auto component sector looks increasingly promising, both domestically and internationally.

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