India’s Auto Component Sector Grows 12.7% in FY26

Anirudh Jain - Kolkata Bureau Jul 07, 2026 1,600 Views

India’s auto component sector achieved a 12.7% turnover growth to $85.9 billion in FY26, driven by strong OEM demand and aftermarket expansion. However, a 13% rise in imports outpaced a 5% export growth, resulting in a $1.37 billion trade deficit, highlighting a need for greater domestic technology localization.

Strong domestic demand has propelled the industry to a turnover of $85.9 billion, though a widening trade deficit signals a growing reliance on imported specialized technology.

NEW DELHI — India’s auto component industry recorded a robust turnover of $85.9 billion (approximately ₹7.60 lakh crore) in the 2025-26 fiscal year, marking a 12.7% year-on-year growth, according to the latest performance review by the Automotive Component Manufacturers Association of India (ACMA).

The industry’s performance underscores a significant expansion over the past five years, maintaining a compound annual growth rate (CAGR) of 17%. While the sector benefited from high domestic vehicle production and increased supplies to original equipment manufacturers (OEMs), the report highlights a growing trade imbalance as imports outpaced exports during the fiscal year.

Growth Driven by OEM Supplies and Domestic Demand

The primary engine behind the 12.7% growth was the supply of parts to OEMs, which surged 16.3% to $75 billion. This increase reflects the sustained momentum in India’s automotive manufacturing across passenger vehicles, commercial vehicles, and two-wheelers.

Additionally, the aftermarket segment—vital for vehicle maintenance and repair—grew by 9% to $12.3 billion. Industry analysts attribute this expansion to a larger total vehicle population on Indian roads, a trend toward purchasing more powerful vehicles, and the increasing formalization of the automotive repair and service ecosystem.

Widening Trade Deficit: Imports Surpass Exports

Despite the domestic success of the auto component industry, the external trade front presents a challenging picture. During FY26, exports grew by a modest 5% to reach $24 billion, largely buoyed by strong demand from European markets. Conversely, imports of auto components climbed by 13%, reaching $25.4 billion.

This disparity resulted in a trade deficit of $1.37 billion. ACMA data indicates that the bulk of these imports—specifically in drive transmission, steering systems, and engine components—originated from China, Japan, and Germany. The surge in imports highlights a persistent demand for advanced, specialized technology that remains domestically under-supplied.

Official Perspectives on Industry Resilience

In a statement regarding the annual performance, the Automotive Component Manufacturers Association of India (ACMA) emphasized that the industry’s resilience has been tested by an uncertain international environment.

"FY26 reaffirmed the strength and resilience of India's auto component industry," said Vinnie Mehta, Director General of ACMA. "Robust domestic demand, continued investments in capacity and technology, and the confidence of global customers enabled the industry to deliver another year of healthy growth."

Mehta added that while the rise in imports of advanced technology and specialized components presents a challenge, it also underscores a critical opportunity for Indian manufacturers to "deepen localization, accelerate technology development, and move further up the value chain."

Challenges and Future Outlook

The report also identified several headwinds facing the sector in the coming year, including:

Geopolitical Uncertainties: Ongoing conflicts and tensions in West Asia and Eastern Europe continue to disrupt global supply chains.
Raw Material Volatility: Fluctuations in material costs remain a concern for manufacturers.
Technological Hurdles: Limited availability of rare earth magnets and specialized electronic components is forcing a reliance on imports.

Despite these hurdles, industry leaders remain optimistic. The government’s ongoing focus on carbon neutrality, the establishment of new Free Trade Agreements (FTAs), and aggressive infrastructure development are expected to support continued growth for the auto component industry in the coming fiscal cycles.

Key Facts at a Glance

Industry Turnover: $85.9 billion, representing a 12.7% increase.
OEM Supply Growth: Supplies to manufacturers rose by 16.3% to $75 billion.
Export Performance: Exports grew by 5% to $24 billion, with Europe as a key destination.
Import Surge: Imports rose 13% to $25.4 billion, creating a $1.37 billion trade deficit.
EV Adoption: Supplies for electric vehicles accounted for 4.6% of domestic OEM sales.

FAQ

Why is the auto component trade deficit widening?

The deficit is growing because the demand for high-tech, specialized components—such as advanced drive transmission systems—is rising faster than domestic production capacity, necessitating increased imports from countries like China and Germany.

What factors contributed to the 12.7% growth?

The growth was primarily driven by a 16.3% increase in supplies to original equipment manufacturers (OEMs) and a 9% expansion in the aftermarket segment, supported by high vehicle production and a larger base of vehicles on the road.

How is the industry responding to these challenges?

ACMA and other industry bodies are pushing for deeper localization, increased investment in research and development, and improved technology integration to reduce dependency on imported parts.

What role do EVs play in this growth?

Supplies to the EV segment accounted for 4.6% of total OEM sales in FY26, signaling a steady but early-stage transition toward electric mobility within the domestic component ecosystem.

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