India's Auto Components Industry Sees Robust Growth Amid Trade Deficit Concerns

India's auto component industry has shown a significant growth of 12.7% in FY26, spurred by rising OEM supplies and strong vehicle production. Despite a 5% rise in exports, the import surge widened the trade deficit. Key growth drivers include government policies on carbon neutrality and infrastructure advancements.

The Indian auto component industry marked a significant growth of 12.7% in fiscal year 2026, as reported by the Automotive Component Manufacturers Association of India. This upturn is attributed to a marked increase in supplies to Original Equipment Manufacturers (OEMs), surging by 16.3% alongside robust production growth across all vehicle categories.

Meanwhile, the aftermarket segment experienced a respectable 9% expansion. This rise was bolstered by an expanding vehicle base and market formalisation, driven by higher demand for used vehicles, a shift toward larger and more robust vehicles, and the increasing standardisation of the repair and maintenance industries. India's exports grew by 5%, yet imports outpaced them with a 13% increase, leading to a USD 1.37 billion trade deficit.

Exports benefited from heightened shipments to Europe, partly fueled by anticipation of new trade agreements and stronger procurement from European OEMs. Main exports included engine components and drive transmission and steering systems, which comprised over 50% of exports. Conversely, imports rose, mainly from China, Japan, and Germany, with drive transmission, steering, and engine components accounting for 56% of total imports.

The report outlined numerous factors impacting the sector's trajectory. Growth is propelled by government initiatives on carbon neutrality, expanded Free Trade Agreements (FTAs), infrastructure progress, and rising domestic vehicle demand. Yet, challenges persist with geopolitical instabilities, material price fluctuations, and labor shortages presenting significant hurdles for the industry's growth.