New Delhi- India’s auto-component industry is on a strong growth trajectory, expanding at a compound annual growth rate of 17 per cent to reach $86 billion in FY26, but companies will need to strengthen their resilience to deal with future disruptions as the sector targets nearly $200 billion by FY30, according to a report released on Wednesday.
A joint report by Boston Consulting Group (BCG) and the Automotive Component Manufacturers Association of India (ACMA) said the industry has already achieved around 70 per cent localisation and moved into a net trade surplus despite navigating a series of disruptions over the past several years.
The challenges have included the slowdown in 2019, the Covid-19 pandemic, sharp increases in commodity prices and, more recently, restrictions affecting rare-earth supplies.
Despite these risks, industry sentiment remains broadly positive. About 90 per cent of the industry leaders surveyed said they believe the sector is “in the right place at the right time”. At the same time, nearly 78 per cent acknowledged that doing business has become more challenging and risky compared with a few years ago.
The report said the industry is also undergoing a structural transformation as the sources of growth and profitability become increasingly fragmented. Companies are having to navigate the parallel evolution of internal combustion engines and electric vehicles, mechanical and electronic systems, as well as domestic and international markets.
This is forcing auto-component manufacturers to make critical strategic choices, including whether to invest ahead of demand or wait for greater certainty, diversify their operations or deepen their focus on existing strengths, and accelerate automation or continue investing heavily in their workforce.
The report also highlighted the financial benefits of resilience. Companies that have demonstrated greater resilience over the years recorded an average margin advantage of nearly 1.4 percentage points. The gap was particularly pronounced during periods of severe disruption, suggesting that resilience can translate directly into stronger financial performance.
To help companies make resilience a sustainable competitive advantage, the report identified five key areas: people and talent, supply-chain strength, demand diversification, value-add capabilities and technology enablement.
Reaching the $200 billion target by FY30 will require the industry to go beyond simply increasing production capacity. Deeper localisation, higher value addition, stronger engineering and product-development capabilities and sustained competitiveness in export markets will be crucial, said Vikrampati Singhania, President of ACMA.
“Resilience must now become a strategic capability that enables us to anticipate change and seize new opportunities,” he said.
Saurabh Chhajer, Managing Director and Partner at BCG, said the companies likely to emerge as leaders will be those that move beyond small-scale technology experiments and deploy solutions across their operations.
He pointed to greater use of automation to maintain continuity, digital technologies and artificial intelligence to improve decision-making, and connected systems to provide real-time visibility across operations.
With the global automotive industry undergoing a simultaneous shift towards electrification, software, advanced electronics and increasingly complex supply chains, India’s component manufacturers have an opportunity to capture a larger share of the global value chain. However, achieving the FY30 ambition will depend on how effectively companies turn lessons from past disruptions into long-term operational capabilities.
With inputs from IANS