Policy push and EV shift brighten outlook for auto component makers: Report

Government policy changes and the steady shift towards electric mobility are reshaping the growth outlook for India’s auto ancillary industry. Analysts are now seeing a more supportive environment emerging for component manufacturers in India.

A recent research report published by Share India Securities said that measures such as GST rationalisation and incentive-led localisation are beginning to translate into improved demand conditions for the sector. The simplified GST structure introduced in 2025 has helped improve vehicle affordability, indirectly supporting higher production volumes and boosting demand for auto components.

EV transition improves value per vehicle

Alongside policy support, the transition to electric vehicles is creating a structural opportunity. EVs typically use a higher share of electronics, lighting and suspension systems, thereby increasing the value of components per vehicle. Analysts believe this trend could allow component makers’ revenues to grow faster than overall vehicle production over the medium term.

Industry performance and export momentum

Owing to this, the auto-component industry recorded a turnover of approximately ₹6.7 lakh crore (roughly USD 80 billion) in 2024–25, representing close to 10 per cent year-on-year growth. Export performance remained firm, with shipments reaching nearly USD 23 billion, underlining the growing competitiveness of Indian suppliers in global markets.

Growth outlook for FY26

Looking ahead, analysts expect revenue growth of around 7–9 per cent in 2025–26. Demand from the replacement market is seen as a key stabilising factor, while higher utilisation levels are expected to improve operating leverage as volumes scale up.

Role of PLI and localisation

The report also highlighted the role of the Production Linked Incentive (PLI) scheme in encouraging capacity expansion and localisation, particularly in segments such as EV-linked components, electronics and precision manufacturing. These investments are helping suppliers move up the value chain and reduce dependence on imports.

Margin risks and balance sheet strength

On the profitability front, near-term margin volatility remains a possibility due to fluctuations in raw material prices such as steel and aluminium. However, analysts believe that easing commodity cycles, selective price pass-through and efficiency gains should support gradual margin recovery.

The report noted that several listed auto ancillary companies are entering this phase with strong balance sheets, healthy cash flows and consistent earnings profiles. With rising EV penetration, increasing content per vehicle and supportive domestic manufacturing policies, the sector is seen as structurally better positioned at this stage.

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