While much of the attention in the Indian automotive sector goes to the shiny vehicles rolling off assembly lines, a much larger and more seismic change is taking place behind the curtains.
The auto ancillary industry, which has been the long-standing backbone for vehicle production in India, is now taking centre stage as an architect for the global mobility ecosystem, not just as the supplier of the assembly line. Driven by a mix of government policy, a buoyant domestic market and shifting global supply chains, the Indian auto component sector is no longer confined to being just a supplier. It is becoming a global hub for manufacturing, innovation, and exports. Emerging into a paradigm shift is another page in India’s book in the global automotive arena, with the industry moving from being a supporting character in the global auto market to playing a leading role.
The Automotive Component Manufacturers Association of India (ACMA) has reported turnover of $ 80.2 billion for the industry in FY25, representing a year-on-year increase of 9.6 per cent. In perspective, the sector has doubled its size over the last five years, sustaining a healthy CAGR of 14 per cent. Going forward, in line with the Automotive Mission Plan (AMP), the projections point towards a contribution of 5-7 per cent of GDP in the coming years with a long-term valuation target of USD 220 billion. This places the industry in a sharp position as more than a mere contributor to India’s economic tale; in fact, it has become vital to India’s manufacturing capability, transitioning its role from a parts supplier to becoming a strategic partner involved in the financial innovation process. This represents a drastic change, defining the industry’s competitiveness on a global stage.
Vinnie Mehta, Director General of ACMA, highlights a crucial transformation: the sector is evolving from a mere supplier of parts into a strategic partner in innovation, a fundamental change that is defining the competitiveness of the entire industry on a global stage. Mehta predicts that the Indian auto component industry will see a robust 8-10 per cent growth rate in FY26, which is in line with FY25’s growth rate, despite the headwinds that are hitting the industry on the face. The growth driver in this realm will be the continued rise in domestic demand, a strategic push into new export markets, and aggressive investments in future technologies. Proving this robustness is the industry’s capability to adapt to global trends, from electric vehicles to advanced safety systems.
The pillars of growth
The one which set the fire ablaze is categorically the domestic market. A fast-growing urban middle class, driven by increasing disposable incomes, has powered a boom in automobile ownership. This demographic trend is not only about numbers, it’s about a desire for better-quality, more technologically sophisticated automobiles. Consumers today are better educated and better informed, and they demand features and performance that were earlier limited to the luxury segment. This means demand has increased for the likes of improved infotainment, sophisticated safety technologies such as ABS and airbags and advanced cars which are more fuel-efficient and give lower emissions.
Rajesh Premchandran, Chief Sales & Marketing Officer of NBC Bearings. sums this situation up by stating, “Clearly, there’s a direction toward better quality and more technically advanced vehicles which places a lot of pressure on homegrown suppliers to advance to global standards of precision and durability.” This is where market force comes into play; it will drive suppliers to continually enhance their capabilities, invest in new equipment, improve their quality control systems, and so forth. This creates an entire ecosystem that is constantly optimising and improving, which means that India’s component manufacturers, rather than being stagnant and lagging, are increasingly becoming competitive and staying ahead of the curve. It is this cycle of continuous improvement and innovation that will distinguish the leaders from the stragglers in the future.
Another core pillar behind the growth is the Indian government’s ‘Make in India’ initiative. By actively promoting local manufacturing and reducing reliance on imports, the policy has allowed the Indian suppliers to have a larger pie of the domestic auto market. However, with technological advancements across the sector, from the complex architecture of EV drivetrains to the complicated designing of advanced safety systems from both hardware and software perspectives, the Indian auto component suppliers have seen an increased need for precision-engineered parts as well. Dr. Lokesh Agrawal, the Chief Technical Officer at NBC Bearings, explains, “The complexity has grown exponentially. Domestic manufacturers are moving beyond basic components, increasingly aligning with complex requirements and delivering more sophisticated solutions. This has created a self-sustaining cycle of innovation and excellence within the industry.”
The growth is further boosted by India’s open-door FDI policy that allows for 100 per cent foreign investment. As per the statistics, global automakers have invested over $37.21 billion in the country since the year 2000, allowing the market to not just attract capital but also gain best practices from across the globe, along with cutting-edge technology and international quality standards. This has, in turn, helped the industry to fund large-scale projects which have seamlessly integrated Indian manufacturers into a sophisticated, global manufacturing network, accelerating their technical evolution by decades.
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From local to global
The aspiration of the Indian auto ancillary industry goes much beyond its domestic market. It is looking towards the global stage, with around 27 per cent of its production every year going to major markets in Europe, ASEAN, the Middle East and North America. This is a tactical manoeuvre to take advantage of supply chain reconfigurations in the world, especially the effort by multinational OEMs to shift their sourcing off a sole source such as China. This “China+1” is a strong tailwind for Indian manufacturers.
Premchandran points out that India is gaining increasing recognition as a credible sourcing location for key aspects like bearings, transmission systems, and chassis assemblies. “OEMs around the world are looking at India as a long-term strategic supplier,” he states. The credibility rests on a compelling combination of quality and economics. Operating costs in the Sector are 10-25 per cent lower than from European or Latin American sourcing hubs, and with a qualified workforce, the products produced not only meet but also consistently exceed global quality expectations. Also, India is rich in engineering talent and has considerable R&D capabilities to support the whole indefinite accountable supply chain.
The future for auto component exports looks exceptionally promising, with projections suggesting USD 32-35 billion by FY26. This growth is significantly bolstered by the government’s Production-Linked Incentive (PLI) scheme. It is expected that the PLI scheme will inject an additional USD 10 billion into the capacity expansion for these auto component makers over the next five years. This would provide the required firepower to sustain both the domestic and the global ever-increasing demand. The scheme projects a clear picture: the government is backing the industry’s global ambitions with tangible support.
However, no growth track is complete without obstacles. The everlasting geopolitical uncertainties, including tariff wars paired with supply chain disruptions and international sanctions, are the looming threats that hinder the raw material access and export competitiveness. Premchandran explains that ‘companies with flexible operations and global market access’ will be the ones tasting success in these volatile environments. The ability to adapt and pivot, diversifying supply chains and market presence, will be the ultimate competitive advantage.
The EV Revolution and a New Frontier of Innovation
File photo of an employee working on a chassis and drivetrain with the battery of a VW EV at the Zwickau production plant (AFP)Arguably, no development has had a deeper and more revolutionary effect on the sector than the EV revolution. The government’s 2030 vision of attaining 30 per cent electrification in the mobility sector has triggered a surge of investment and innovation that has revolutionised the product portfolio of component manufacturers. Regulations such as exemptions in customs duty on capital goods utilised in producing lithium-ion batteries have reduced the entry barriers, prompting local players to enter this high-stakes and complicated market.
The next phase of the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme is coming with a significant budget for charging infrastructure across the country and will create a new huge market for the likes of cables and connectors, and control systems. “This is a once-in-a-lifetime opportunity,” says Mehta. “Whoever is doing it now, and going forward to build the components for EVs – motors, power electronics, thermal management and high-voltage systems etc, and are investing in it today, will lead in the next decade.” However, this transition is not only about making new components; it is also about re-skilling the workforce and completely re-engineering how work is done and how manufacturing is performed.
The technological transformation is also reflected in the mode of making parts. Implementation of automation, robots and AI-powered quality control is transforming production lines. Precise robotic arms, automated assembly, and 3D printing have streamlined faster prototyping, higher reliability, and substantially lower lead times. Premchandran further points out that Tier-1 and Tier-2 suppliers are already utilising cutting-edge practices such as digital twins and Industry 4.0 to improve operational efficiency and global competitiveness. This shift towards smart factories isn’t solely about efficiency; it’s about achieving the strict quality requirements needed by global OEMs for next-generation vehicles.
The emerging growth areas extend beyond just EVs. The auto industry, not just in the domestic market, but globally, has seen a rapid advancement in three key areas – advanced safety systems, autonomous driving components and lightweight EV materials. Nirmal K. Minda, the Executive Chairman of the Uno Minda Group, emphasises the need to focus on PACE – Personalised, Autonomous, Connected and Electric, in the automotive space. He explains that the Indian auto component industry has immense potential to make itself the global hub with a powerful confluence of sustainability, connectivity and artificial intelligence. The Uno Minda Executive Chairman highlighted the need for a collaborative approach, particularly in the EV space. He stated, “We must learn from countries like China, who are well ahead in technology and scale.”
Minda also provided a clean vision for the industry, which also includes important growth areas and a grounded perspective on risks. He stated that the clear objective should be intelligent, connected, and sustainable mobility products. The sector must invest in products in the areas of sensor technologies and battery management systems, and smart lighting products. These products will be the drivers for the next decade. On the headwinds, Minda accepted that geopolitical uncertainty, supply chain disruptions and competition are always a risk, though he is hopeful as those won’t apply to companies with flexible operations and a substantial global market. He also noted that the government’s Production-Linked Incentive (PLI) scheme has been a facilitator, as it has increased pressure on net OEMs to localise EV parts, which is crucial for the Indian Component industry to build a domestic value chain.
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The Road Ahead
The Indian auto ancillary sector’s future continues to look incredibly bullish, with a well-defined route to becoming the world’s leading player. The long-term strategy of the industry is defined by pledging to be innovative, automated and heavily export-oriented. Entry into OEM partnerships, selective R&D alliances, and close monitoring of the new EV segments will be key in determining the next leg of industry growth. The sector’s journey, while impressive, is just getting started. The true test will be its capacity for scaling up, sustaining quality, and continually innovating to keep pace with the demands of a fast-changing world market.
Mehta concludes with a bold and optimistic vision for the industry’s path forward: “The Indian automotive component industry is now entering a golden decade. We have endured global headwinds and emerged stronger and better, establishing that our ecosystem is not only resilient, but also flexible and capable of competing on a global scale. Our future will be based on our ability to innovate and integrate. We have no doubt that, with more investment into advanced technologies and absolute commitment to quality, we will meet and exceed the expectations of the global market, undeniably establishing India as the world leader in mobility solutions.” In essence, it is the story of an industry that has stepped out of the shadows, earning its place at the centre of India’s mobility journey. It shows that the real worth of a vehicle is not in the sheet metal, but in the network of components, crafted with skill and precision, that give it character, stability and performance.