Beyond Just Making In India: Can Indian Auto Component Makers Lead Global Innovation?

India's automotive component industry has experienced significant growth over the past decade, transforming from a largely domestic supplier network to a key player in the global automotive value chain. The industry posted a turnover of Rs 3.32 lakh crore (US$ 38.4 billion) in FY 2024, registering an 11 per cent increase over the previous fiscal year. While this upward trajectory is fueled by increasing domestic demand and favourable export trends, the pressing question now is whether India can transcend its role as a cost-competitive manufacturer and emerge as a global hub for innovation in automotive components.
The Engine Behind the Surge
Several key economic, demographic, and policy factors are driving India’s rapid growth in the automotive sector. The country’s expanding workforce and growing middle class are boosting demand across multiple vehicle segments, with 4.22 million passenger vehicles sold in FY24. Two-wheeler sales surged by over 13 per cent to reach 17.9 million units, while commercial vehicle sales held steady at 9,67,000 units. This surge in domestic consumption has had a ripple effect on the components industry, further strengthening India’s position on the global automotive stage.
India now exports over 25 per cent of its auto component production, a number expected to grow in the coming years as global supply chains undergo a significant restructuring. The growing skepticism toward single-country sourcing models, coupled with India’s cost advantage, has made the country a preferred supplier in the global market. While the “Make in India” initiative continues to be a driving force, the industry is slowly making a shift toward the next frontier: Design and Innovate in India. Is India prepared to fully embrace this transition?
A Closer Look at the Supply Chain: India’s Strategic Advantage
India’s cost competitiveness is a major advantage, with manufacturing costs 10-25 per cent lower than in Latin America or Europe. Being the world’s second-largest steel producer, the country enjoys convenient access to essential raw materials. Its strategic location, close to key automotive markets like ASEAN, Japan, Korea, and Europe, further strengthens its position as a natural export hub for the global automotive industry. This geographical advantage, coupled with the lower cost of manufacturing, positions India as a natural export base for the global automotive industry.
Policy support has also been a key enabler of this growth. For example, in January 2024, the Indian government sanctioned an additional Rs 1,500 crore (US$ 180.3 million) to support the second phase of the FAME-II (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) scheme. The policy move, combined with 100 per cent Foreign Direct Investment (FDI) in the sector, signals the government’s intent to foster a thriving ecosystem for auto components, making India an increasingly attractive hub for both manufacturing and innovation.
The Global Push: Beyond Volume, Toward Value
While India has proven its ability to scale up production, the question that now looms larger is whether it can lead in engineering innovation. As global Original Equipment Manufacturers (OEMs) pivot toward electrification, autonomous driving, and software-led mobility, the focus is shifting from conventional mechanical parts to more advanced systems such as electric motors, automatic transmissions, and lightweight drivetrains.
India's auto component manufacturers are already actively driving the change needed for this transformation. By FY28, the Indian automotive sector plans to invest Rs 58,000 crore (US$ 7 billion) to enhance the localisation of advanced components, with a focus on key areas such as clutch assemblies, steering columns, engine transmission parts, and frames for electric vehicles. These components are not just essential for the next generation of vehicles; they represent the opportunity for India to move beyond cost-efficiency and embrace cutting-edge technology.
Challenges Along the Road to Innovation
While India’s prospects in the auto component sector are promising, several significant challenges continue to impede progress. A key hurdle is the country’s heavy dependence on imported high-performance semiconductors, sensors, and rare-earth materials—critical components for advanced automotive technologies such as electric vehicles and autonomous driving systems. Although India boasts a strong mechanical engineering workforce, transitioning to more complex fields like mechatronics, which blends software, sensors, and electronics, requires substantial investment in upskilling—an effort that is still in its early stages.
The Road Ahead: A New Era of Indian Innovation?
The path forward is filled with challenges, but it also holds significant promise. As global automakers embrace the “China Plus One” strategy and seek to diversify sourcing, India finds itself in a prime position to capitalise on this trend. According to a report by the Boston Consulting Group, India’s auto component industry has the potential to reach export levels of USD 100 billion within the next 7 to 8 years. This moment is pivotal for determining whether Indian component makers will continue as efficient subcontractors or evolve into key co-creators of global mobility solutions.
For India to succeed in this transition, it must leverage its core strengths — scale, cost efficiency, and strategic location — while making a serious push for R&D and innovation. The significant investments in advanced electric vehicle components and a focus on localised, high-quality production will be crucial in ensuring that the shift from manufacturing to innovation is not just possible, but inevitable.
The above article has been written by Ajinkya Firodia, Vice-Chairman and Managing Director of Kinetic Engineering.