Sector Spotlight Series: Auto Components

India’s automotive industry is undergoing a profound transformation, driven by technological advancements, shifting consumer expectations and evolving global supply chains. In response, and to remain competitive in the longer-term, companies must refine their strategies and embrace innovation. Contributing 35% to India’s manufacturing GDP, the sector is a key pillar of the economy, employing millions and supported by approximately 800 organised players and over 10,000 SMEs. At a recent, combined online session of the India CEO, CFO, CHRO and CMO Forums, led by Kumar Subbiah, CFO & Executive Director at CEAT; Rajesh Bhandari, Senior Managing Director Commercial at Gates Corporation; and Jagdish Kumar, Group President and CFO of the ANAND Group, we explored the changing automotive and auto-component industries.

India’s Competitive Edge: Engineering Talent and Cost Efficiency

India is well positioned to drive innovation in the automotive space by leveraging its vast pool of engineers and cost-effective labour force. These advantages provide a strong foundation for competing in global markets. Regulatory compliance and technological advancements have already made a mark, as seen in the rollout of BS6 engines, which have significantly improved emission standards while ensuring consistency in engine performance. However, to sustain and accelerate growth, greater private and public capex spending is essential.

Strengthening the Supply Chain and Smart Manufacturing

While India exports a substantial volume of auto components, it controls only 2-3% of global shipping lines, limiting its export capabilities. Enhancing the country’s shipping infrastructure, as well as the domestic logistics industry, will be key to improving efficiency. Additionally, adopting smart manufacturing – which includes automation, AI-driven production and predictive analytics – will further bolster India’s competitiveness.

Advancements in EV Battery Technology

EV adoption is increasing globally and battery technology remains the key determinant of an EV’s efficiency and range. The primary focus for Indian manufacturers is optimising the single-charge run to enhance consumer confidence and adoption rates, and significant investments are being made in this area. While China dominates in terms of scale, India's strength lies in the quality of components it produces, which can serve as a differentiator in the global market. 

Strategic Alliances: The Fast Track to Innovation

As automotive technologies continue to evolve rapidly, strategic alliances will be crucial to maintaining India’s competitiveness. Partnerships enable companies to leverage existing technologies and gain faster access to global advancements. However, there are significant gaps in terms of local R&D investment, which must be addressed to drive innovation and reduce India’s reliance on imported technology. Collaborating with global firms allows Indian companies to develop new applications while accessing cutting-edge solutions at a lower cost. To move towards self-sufficiency and technological leadership, businesses must allocate a higher share of their turnover to R&D. Additionally, MNCs looking to enter specific markets often seek local partners with deep market insights. By positioning itself as an R&D base for Global Capability Centres (GCCs), India can attract investments, generate employment and build a strong pipeline of skilled professionals for the automotive industry.

Boosting Localisation Through Policy Support

Government initiatives are accelerating India’s push for self-reliance in the automotive sector. While the PLI scheme primarily benefits OEMs, extending incentives to suppliers and component manufacturers is crucial for strengthening the value chain. The FAME-2 mandate caps foreign-sourced components at 50%, aiming to boost local manufacturing and reducing import reliance. Similarly, the National Manufacturing Mission 2025 promotes domestic EV component production through tax breaks and funding. Make in India has improved business conditions but deeper localisation, especially in Tier 2 and Tier 3 cities, will be a key in driving cost competitiveness, streamlining production and improving export competitiveness.

Shifting Consumer Preferences and Market Trends

Consumer preferences are rapidly shifting, making speed-to-market an increasingly critical factor. Demand is rising for fuel-efficient, electric and hybrid vehicles, driven by priorities like convenience, safety and sustainability. At the same time, the luxury segment is expanding, fuelled by the demand of premium features and cutting-edge technology. To stay ahead of the curve, businesses must go beyond data analysis, leveraging consumer insights to anticipate trends and make strategic bets. A sharp understanding of behavioural patterns and the agility to act on emerging opportunities will be key to staying competitive. 

India’s automotive sector is at an inflection point, with immense potential for growth. While the country has established itself as a key player in manufacturing and exports, challenges remain in areas such as R&D, supply chain infrastructure and localisation. By leveraging its engineering talent and low labour costs, India can position itself as a global leader in automotive innovation. Strategic alliances, policy support and consumer-centric approaches will be the driving forces in shaping the future of this dynamic industry.