India's Unsung Hero: Auto Components Pacing 2025 Growth

SYNOPSIS

Fueling India's economic engine, the often-overlooked auto component industry is experiencing a significant boom. This growth is driven by strong domestic demand, a surge in high-value exports, and a strategic pivot to electric mobility. Projected to be a key driver of India's 2025 growth story, the sector is vital for the nation's industrial ambitions. Despite challenges, government support and a focus on innovation are paving the way for its continued success.

India's auto component industry is booming due to domestic demand, exports, and EV focus, vital for 2025 growth despite challenges.

Amidst the grand story of our country’s economic rise, industries  like  IT, pharma, and renewable energy tend to absorb all the limelight. But they are silently fueling the growth of industry in the auto component sector, which is all set to be the key driver of India's 2025 growth story.

The Indian auto component industry, valued at  Rs. 6.14 lakh crore (USD 74.1 billion) registering 9.8% growth in FY 23-24, thus outpacing the turnover of Rs. 5.59 lakh crore in the previous fiscal, according to the Automotive Component Manufacturers Association of India (ACMA). The rising trend is not only a COVID recovery but an indicator of deeper change -one that is fueled by homegrown demand, export growth, and a move toward electric mobility.

Strong Pillar of the Automotive Ecosystem

India's automotive component industry is an important gear in the overall vehicle machinery, serving two-wheelers, passenger cars, commercial vehicles, and the  electric vehicle (EV) market. This industry contributes a small portion  to the GDP of India and has direct and indirect engagement of more than 5 million individuals. Its strength is its robust structure of more than 800 organized players and thousands of unorganized small and medium businesses (SMEs).

Global Integration and Export Boom

India has become a world leader in low-cost, high-quality auto parts, exporting parts to over 160 nations. India's  exports grew by 5.5% to USD 21.2 billion while imports grew by 3% to USD 20.9 billion, thus resulting in a trade surplus of USD 300 million.  The "Make in India" program and bilateral free trade agreements have further excelled the global presence of our country.

The major factor is the increase in value-added exports , engine components, electronic parts, and precise engineering goods , showing the move away from low end to high end production.

Driving EV Transformation

The EV revolution offers a destructive opportunity. As global automobile manufacturers are turning towards cleaner mobility, our country’s component industry is rising against the challenge with investments in battery management systems, electric motors, and power. Bosch India, Sundram Fasteners, and Sona Comstar are putting in money heavily in research and development in order to match international levels.

As per ICRA, the Indian auto component segment is likely to expand at 8-10% CAGR until 2025, driven mainly by the EV transition, growing premiumization of automobiles, and higher localization.

Challenges and the Road Ahead

Even with the growth, issues persist - supply chain disruptions, skill gaps, and a need for ongoing technological upgrades. With the government's PLI scheme for auto components, worth ₹25,938 crore, and an increasing focus on indigenization, the sector is ready to combat them.

With the country set to become a $5 trillion economy, the role of the auto component sector, while habitually overlooked, is vital. It is not just a supplier but a quiet facilitator of India's industrial drive and technological growth.

Mehul Agarwal