India’s auto component industry is emerging as a global contender, supported by cost competitiveness, skilled labor, and a growing domestic market. According to a McKinsey report, the sector is projected to reach US$ 200 billion by 2030, with exports expected at US$ 70–100 billion. Growth is fueled by rising domestic demand, increased vehicle penetration, and adoption of new technologies, alongside expanding electric vehicle (EV) and internal combustion engine (ICE) markets. Companies are also enhancing supply chain resilience through increased local production, diversified sourcing, and strategic shifts to low-risk, cost-efficient regions.
With rapidly shifting global trade dynamics, India is emerging as a pivotal player in the auto component sector, supported by its cost advantage, skilled workforce, and expanding domestic market. A McKinsey report, “Shaping the Future of India’s Auto Component Industry amid Global Trade Shifts,” projects that the industry could touch the US$ 200 billion mark by 2030.
The report notes that geopolitical and structural shifts are reshaping global trade, with US$ 12–14 trillion worth of trade expected to shift across trade corridors by 2035. Despite the disruptions, total trade is forecast to rise from US$ 33 trillion in 2024 to between US$42 trillion and US$ 45 trillion by 2035.
Market outlook and growth drivers
The Indian auto component industry has sustained a compound annual growth rate (CAGR) of nearly 10% over the last five years, fueled by domestic demand and expanding export opportunities.
As per the report, with rising domestic and export demand, the industry is on track to reach US$ 200 billion by 2030. The McKinsey projects domestic sales to grow 7–8% annually through FY30, driven by rising vehicle penetration, greater parts usage per vehicle, and adoption of new technologies. On the export front, India’s auto component value is expected to reach US$ 70–100 billion by FY30.
Two primary growth drivers stand out. The first is a US$ 20–30 billion export opportunity in internal combustion engine (ICE) components as global sourcing consolidates. The second is the rapid expansion of India’s electric vehicle (EV) segment, expected to grow at a 35% CAGR in line with the worldwide push toward electrification and connectivity. Together, these trends are expected to accelerate India’s integration into global supply chains.
Supply chain diversification and strategic shifts
The report notes that supply chain disruptions, including pandemic lockdowns, energy crises, and logistical hurdles, have prompted companies to accelerate diversification. In an uncertain landscape, companies are increasingly pursuing supply chain diversification strategies to build resilience. This involves three key approaches:
- boosting local production,
- expanding manufacturing facilities, and
- multi-sourcing & supplier diversification.
Businesses are enhancing in-country manufacturing to minimize dependence on imported components. Indian Tier-I suppliers, for example, are partnering with the leading US rare earth producer to strengthen in-country manufacturing capacity.
Globally, firms are relocating production capacity to regions that offer lower risk or greater cost efficiency. For instance, German component manufacturers are setting up facilities in Mexico, while Chinese battery makers are expanding into Southeast Asia.
In addition, firms are moving away from single-source vendors and adopting a more diversified supplier base. For instance, a major Japanese battery producer is phasing out China-sourced materials in its products. A number of US and Japanese automakers have notably boosted component procurement from non-Chinese suppliers.
Future outlook
India’s auto component industry surpassed US$ 80 billion (around ₹7,06,246 crore) in FY25, with exports reaching US$ 23 billion (about ₹2,03,045 crore). The initiatives like the PLI scheme have already attracted over ₹29,500 crore in investments and created more than 45,000 jobs, while the PM-eDRIVE programme is set to accelerate India’s shift to electric mobility across two-wheelers, buses, and trucks.
The government envisions positioning India as a global hub for smart, sustainable, and affordable mobility by 2030, powered by clean fuels and advanced technologies. Ongoing FTA talks with the EU are expected to open new avenues for growth, complemented by continued support measures like reducing GST on auto parts to 18%. Industry leaders agree that India has the potential not merely to participate but to take a leading role in the global auto supply chain.
Conclusion
With strong domestic demand, rising exports, and supportive government initiatives like PLI and PM-eDRIVE, India’s auto component industry is poised for transformative growth. By enhancing supply chain resilience and leveraging its cost and talent advantages, the country is not only set to strengthen its global presence but also emerge as a leader in the evolving global auto supply chain.
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FAQ
Q1: What is the current size of India’s auto component industry?
A: India’s auto component industry surpassed US$ 80 billion (around ₹7,06,246 crore) in FY25, with exports reaching US$ 23 billion (about ₹2,03,045 crore).
Q2: What is the projected size of the industry by 2030?
A: According to a McKinsey report, the industry is expected to reach US$ 200 billion by 2030, with exports estimated at US$ 70–100 billion.
Q3: What are the key drivers of growth in India’s auto component sector?
A: Growth is fueled by rising domestic demand, higher vehicle penetration, adoption of advanced technologies, expansion of electric vehicle (EV) and internal combustion engine (ICE) markets, and favorable government initiatives like PLI and PM-eDRIVE.
Q4: How is India strengthening its auto supply chain?
A: Companies are enhancing resilience through local production, multi-sourcing, expanding manufacturing facilities, reducing dependence on imports, and strategically relocating production to low-risk, cost-effective regions.
Q5: What are the main challenges for the industry?
A: Challenges include global supply chain disruptions, geopolitical uncertainties, energy shocks, and the need for diversification in sourcing and production.
