India’s auto ancillary industry is poised for another year of healthy growth, with the sector’s market size expected to rise 8-9% to ₹10,681 billion in FY27 from around ₹9,835 billion in FY26, according to CareEdge Ratings.
The rating agency expects growth to be driven by healthy demand from original equipment manufacturers (OEMs), rising component content per vehicle, resilient replacement demand, higher localisation and increasing opportunities in global sourcing.
CareEdge Ratings said the industry is entering a sustained, investment-led growth phase, supported by expanding domestic vehicle production and increasing value addition across the automotive supply chain.
Vehicle production drives component demand
India’s total vehicle production increased from around 23 million units in FY22 to 34.7 million units in FY26, reflecting broad-based growth across segments.
Domestic OEMs remained the largest revenue contributor for auto component manufacturers, accounting for around 67% of industry revenues in FY26. Exports contributed around 22%, while the aftermarket accounted for 11%.
The increasing preference for SUVs and premium vehicles, along with tighter safety and emission regulations, is raising component content per vehicle and driving demand for higher-value systems.
The aftermarket is also expected to provide stability, supported by the expanding vehicle parc, rising average vehicle age, premiumisation and demand for replacement parts and maintenance.
Auto component exports are projected to increase to approximately ₹2.3 trillion in FY27, reflecting India’s growing integration into global automotive supply chains.
EVs reshape the component value pool
The rapid adoption of electric vehicles is creating a structural shift in the auto component industry.
EV registrations increased from around 1.7 lakh in FY20 to 24.5 lakh in FY26, taking overall EV penetration from 0.71% to approximately 8.28%.
While conventional internal combustion engine (ICE)-linked components are expected to remain the industry’s backbone over the medium term, rising EV penetration is creating opportunities for technology-intensive component manufacturers.
Batteries account for around 40-50% of EV costs, while electronics account for approximately 23% of the bill of materials, compared with less than 10% in conventional ICE vehicles.
The transition is consequently expanding opportunities in batteries, motors, power electronics, semiconductors, sensors, controllers, thermal management systems and embedded software.
Multi-pathway mobility creates new opportunities
CareEdge Ratings expects India’s mobility transition to remain multi-pathway rather than being driven solely by battery electric vehicles.
Hybrids, flex-fuel vehicles, ethanol-blended fuel platforms, CNG vehicles and potentially hydrogen-based technologies are expected to create opportunities across fuel systems, emission-control technologies, sensors, electronic control units and lightweight materials.
Government initiatives such as the PLI-Auto Scheme and PM E-DRIVE are also expected to accelerate domestic capacity creation and reduce dependence on imported critical automotive technologies.
Global sourcing opportunity
CareEdge Ratings, Senior Director, Ranjan Sharma, said India’s auto component industry has become an increasingly important part of the global automotive supply chain, supported by manufacturing competitiveness, engineering capabilities and a growing domestic market.
With the auto ancillary market expected to surpass ₹10.6 trillion in FY27, he said the sector was well positioned to capture a larger share of global sourcing opportunities.
Continued localisation of critical components and development of advanced manufacturing capabilities will be crucial to increasing value addition and strengthening India’s position in the global automotive ecosystem, Sharma added.
Top 50 companies to maintain healthy performance
The operating performance of the top 50 listed auto ancillary companies is expected to remain healthy, with aggregate income projected to rise from approximately ₹4,325 billion in FY26 to ₹4,714 billion in FY27.
Profitability is expected to remain broadly stable, supported by operating leverage, an improving product mix and cost pass-through mechanisms with OEMs.
However, raw material price volatility, higher freight costs, evolving US tariff policies and geopolitical developments could pose risks to the sector.
The industry’s continued dependence on imported battery cells, semiconductors, rare earth minerals and other technology-intensive components also remains a key monitorable.
Technology readiness will determine winners
CareEdge Ratings, Associate Director, Arti Roy, said the industry’s shift towards electronics-intensive and cleaner mobility platforms was creating opportunities across EV-linked components, advanced electronics, powertrain technologies and other high-value automotive systems.
Companies with diversified customer relationships, wider product portfolios, strong engineering capabilities and prudent capital allocation are expected to be better positioned to benefit from the evolving component value pool.
The rating agency also highlighted the ability of companies to keep pace with technological advancements, strengthen localisation and navigate changing global trade policies as important factors determining the industry’s long-term competitiveness.
With domestic vehicle production expanding and India’s role in global automotive sourcing increasing, the auto ancillary industry is entering a phase where scale, localisation, technology and engineering capabilities are likely to become increasingly important drivers of growth.