Auto Ancillary Market in India 2024-2029

The faster growth rate of automotive sales in the domestic market, compared to overall production growth, reflects rising demand within the sector. This upward trend presents significant opportunities for automobile manufacturers and supporting industries to expand their capacities, launch new models, and meet the increasing demand.

In FY 2024, the Indian auto ancillary market was valued at INR 6.14 trillion, expanding at a compound annual growth rate (CAGR) of ~10.67% during FY 2025 - FY 2029 period.

A significant change in consumers’ purchasing habits, particularly after COVID-19, led to a greater emphasis on features like safety, driving experience, premium interiors, aesthetics, and comfort, rather than just the price. This shift has bolstered the demand for advanced components and spurred innovation in electric vehicles (EVs), smart vehicles, and autonomous driving systems.

Market segmentation:

Engine components, body/chassis, and suspension braking components accounted for more than 50% of total auto ancillary sales in FY 2023 and FY 2024. The high sales of engine components and body/chassis segment are driven by the strong surge in the domestic market, higher localization by original equipment manufacturers (OEMs), and the need for more components for each vehicle.

The passenger vehicles segment has held the highest share of total auto component supplies to OEMs since FY 2022, followed by two-wheelers and light commercial vehicles (LCVs). This trend is anticipated to continue in FY 2025, driven by rising demand, government incentives for manufacturing, increasing urbanization, and a growing middle-class population.

Market growth opportunities:

Initiatives such as Make in India and Digital India, along with improved infrastructure and ease of doing business in India, have significantly boosted domestic manufacturing and attracted foreign investments. Despite these efforts, Indian electronics account for only 4% of global demand, representing less than 1% of the global market share, as reported by NITI Aayog.

This indicates a vast growth opportunity for companies in the electronics sector, including ancillary companies.

Market drivers:

The auto ancillary market in India is experiencing robust growth, propelled by several key drivers. One of the primary factors is the expansion of the domestic automotive market, with rising vehicle sales across segments such as passenger cars, two-wheelers, and commercial vehicles.

The rising trend of vehicle electrification, along with increased consumer awareness about safety and sustainability, has led to a greater demand for high-quality, efficient, and green auto parts. Additionally, India’s strong export potential, supported by competitive manufacturing costs and a skilled labor force, is helping the auto ancillary sector establish a prominent position in global supply chains.

Key deterrents to the growth of the market:

Prices for energy, raw materials, and other inputs needed to manufacture auto components often increase because of inflation. Because of this, the cost of producing auto parts will increase, which will result in a decline in manufacturers’ profit margins.

Price instability brought on by inflation can make it challenging for manufacturers to forecast and control expenses efficiently. This will make it difficult to set competitive auto component costs, which is expected to influence demand.