India’s auto component industry is projected to touch $200 billion by 2030, driven by cost competitiveness, a skilled workforce, and a growing domestic market, according to a report by McKinsey.
The report, titled Shaping the future of India’s auto component industry amid global trade shifts, highlighted that geopolitical and structural changes are reshaping global trade patterns. By 2035, an estimated $12 trillion to $14 trillion in trade is expected to shift across corridors. Despite uncertainties, global trade is set to grow from $33 trillion in 2024 to between $42 trillion and $45 trillion by 2035.
The Indian auto component industry has already recorded a compound annual growth rate of about 10 per cent over the last five years. With steady expansion in both domestic and export markets, it is now well-positioned to benefit from this global realignment.
Domestic auto component sales are expected to rise 7 to 8 per cent annually until FY2030, supported by increased vehicle production, higher component content per vehicle, and adoption of new technologies. Exports are projected to grow significantly, reaching between $70 billion and $100 billion by FY2030.
Two major growth drivers are expected to shape this trajectory. The first is a $20 billion to $30 billion internal combustion engine export opportunity as global markets consolidate. The second is rapid growth in electric vehicles, with domestic EV sales projected to rise at a 35 per cent CAGR in line with worldwide electrification and connectivity trends.
To navigate this evolving landscape, auto players are adopting supply chain diversification strategies. This includes expanding domestic production, setting up new facilities, and moving towards multi-sourcing to reduce dependency on single vendors.
Examples of this shift include Tier-I Indian suppliers and US rare earth producers enhancing local manufacturing. German component makers are investing in Mexico, while Chinese battery companies are expanding into Southeast Asia. Japanese and US automakers are also sourcing more from non-Chinese vendors, with one major Japanese battery firm moving away from China-sourced materials entirely.
With rising demand and global realignment, India’s auto component sector is poised to become a key pillar in global automotive supply chains.
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