Automobile Components

  • The Automotive industry in India is leading in many segments- primarily in Passenger Cars, Utility Vehicles, Vans and two Wheelers. *
  • India’s Automotive Industry is worth more than $222 Bn and contributes 8% of the country’s total export and accounts for 7.1% of India's GDP and is set to become the 3rd largest in the world by 2030.
  • The Automobile component industry in India is composed of organized and unorganized sector. The organized sector refers to original equipment manufacturers (OEMs) and is engaged in the manufacture of high-value precision instruments. Whereas, the unorganized sectors comprise of low-valued products catering to after-market services.
  • Various sub-sectors of the Automobile component industry in India are engine parts, drive transmission & steering parts, body and chassis, suspension and braking parts, equipment, electrical parts and others such as fan belts, die-casting and sheet metal parts.
Reasons To Invest
  • Automotive Mission Plan (2016-26) envisages that the Indian Automotive Industry will grow 3.5 - 4 times in value to about INR 16-18 lakh cr by 2026.*
  • A stable government framework with increased purchasing power, large domestic market and an ever-increasing development in infrastructure have made India a favourable destination for investment.
  • India is emerging as a global hub for sourcing auto components. The key automotive markets like the ASEAN, Japan, Korea, Europe and huge domestic market are geographically closer to India.
  • India offers low cost by 10-25% relative to that offered by Europe and Latin America. Hence, India is cost-competitive as compared to other manufacturing countries.
  • There are minimal restrictions on export-import which make it a favourable trade policy. Furthermore, specific incentives are available for export-oriented units and export processing zones.
  • India’s growing integration in Global Value Chains further offers impetus to the Automobile component industry.
  • Presence of enabling infrastructures like automotive training institutes and auto design centres, special auto parks and virtual SEZs for auto components.
  • India is considered competitive in the manufacturing of forgings, stampings, castings, machining, wiring harness and electronic fuel injectors.
  • A large pool of skilled workforce and a strong educational system are the supporting factors for investment. Improvised R&D operations and laboratories have been set up to conduct activities such as analysis, simulation and engineering animations are helping in additional investment prospects.
  • Out of the global Auto Component trade of USD 1.3 tn, India’s share is USD 15 bn. The Government aims to double its exports of Auto Components to USD 30 bn by 2026.
Key Achievements
  • India’s auto components industry has for the first time recorded a trade surplus of USD 600 mn in the FY'22. *
  • Production Linked Incentive (PLI) Scheme for Automobile and Auto component industry was released with a budgetary outlay of INR 25,938 cr.*
  • PLI Auto scheme has been successful in attracting proposed investment of INR 67,690 cr against the target estimate of investment INR 42,500 cr over a period of five years.*
Recent Announcements

20th Aug 2023: Shri Nitin Gadkari launched  the Bharat New Car Assessment Programme (Bharat NCAP)

Ministry of road transport and highways


25th Jul 2023: Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME India) Scheme Phase-II is being implemented by the Ministry of Heavy Industries for a period of five years commencing from 1st April,2019 with a total budgetary support of Rs. 10,000 crore.

Fame India Scheme


15th March 2023: CCI approves acquisition of sole control of Meritor by Cummins

Competition Commission of India


8th February 2023: Total market of scrapped steel in India is approximately 30 MT.

Scrapped Steel Market


18th November 2022: ARAI, Ansys signs MOU for research in emerging automotive technologies.


  • Automotive Mission Plan (2016-26) projects to provide direct incremental employment to 3.2 mn by 2026. Realization of goals in the Automotive Mission Plan (2016-26) requires an additional investment of USD 25-30 Bn.
  • The Automobile component industry in India will be among the top three of the world in engineering, manufacturing and export of vehicles and components.*
  • Auto components industry grows 34.8% to INR 2.65 lakh cr in H1 FY23.*
Growth Drivers
  • Government of India is providing customs duty exemptions to imports of capital goods and machinery required for manufacture of lithium-ion cells used in EV batteries. *
  • BHEL has successfully manufactured and tested India's highest rating 500 MVA 400/220/33 kV Auto Transformer, at the National High Power Test Laboratory (NHPTL) at Bina in Madhya Pradesh- a new benchmark in the global transformer industry. *
FDI Policy
  • 100% Foreign Direct Investment (FDI) is allowed under the automatic route in the Automobile component industry in India, subject to all the applicable regulations and laws. *
  • The cumulative FDI equity inflow in the Automobile Industry is USD 34.7 bn during the period April 2000 to March 2023. This constitutes 5.47% of the total FDI inflow received across sectors.*
Production Linked Incentive (PLI) Scheme

The Union Cabinet chaired by the Prime Minister, Shri Narendra Modi has given its approval to introduce the Production-Linked Incentive (PLI) Scheme in the Automobile and Auto Components sectors for Enhancing India’s Manufacturing Capabilities and Enhancing Exports – Atmanirbhar Bharat.

Financial Outlay- INR 57,042 cr

For more details on PLI Schemes

Sector Policy
  • The National Auto Policy had been formulated aiming at prescribing policy guidelines and enabling the framework to achieve the predicted growth objectives. *
  • In the Automobile component industry in India, manufacturing and imports are exempted from licensing and approvals.

Automotive Mission Plan 2016-26 *

  • AMP 2016-26 seeks to outline the trajectory of the advancement of the Automobile component industry ecosystem in India.
  • The Automobile component industry in India foresees growth of USD 260-300 Bn by the end of FY 2026.
  • India forecasts to be amongst the top 3 automotive industries in the world by 2026. There will be 65 mn direct & indirect jobs generated by 2026.
  • The GDP contribution of the Automobile component industry in India is projected to be 12% by 2026.

National Automotive Testing and R&D Infrastructure Project (NATRIP) *

  • National Automotive Testing and R&D Infrastructure Project (NATRiP), the largest and most significant initiatives by the Government of India, in the Automobile component industry in India.
  • The chief aim of the project is:
    • To generate core global competencies - state-of-art testing and R&D infrastructure.
    • To enable seamless integration by driving the automobile component industry in India into global automotive excellence.
  • A total of USD 573 Mn investment has been done to adopt and implement global performance standards.
  • The key focus lies in providing low-cost manufacturing and product development solutions.

National Electric Mobility Mission Plan 2020 (NEMMP)

  • NEMMP aims to bring the transformational paradigm shift in the Automotive and Transportation industry by promoting hybrid and electrical mobility in India. 
  • There has been a cumulative outlay of USD 2.15 Bn for building such a roadmap. It is a composite scheme involving demand-side incentives to facilitate the acquisition of hybrid/electric vehicles along with the provision of supply-side incentives.

Explore Government policies/schemes in Automobile Components sector >

Financial Support

R&D Incentives for Industry and Private Sponsored Research: *

  • A weighted tax deduction is given under section 35 (2AA) of the Income Tax Act.
  • Weighted deduction of 200% is granted to assess for any sums paid to a national laboratory, university or institute of technology, or specified people with a specific direction and that the said sum is used for scientific research within a program approved by the prescribed authority.

Manufacturing with an In-House R&D centre:

  • Section 35 (2AB) of the Income Tax Act, 1961 provides weighted tax deduction of 150% of the expenditure incurred by a specified company, on scientific research in the in-house R&D centres as approved by the prescribed authority. This does not include expenditure on the cost of any land or building.
  • The weighted tax deductions will be 100%.

State Incentives:

  • Apart from the mentioned, each state in India offers additional incentives for industrial projects. Incentives are in areas like subsidized land cost, relaxation in stamp duty exemption on sale and lease of land, power tariff incentives, concessional rate of interest on loans, investment subsidies, tax incentives, backward areas subsidies and special incentive packages for mega projects. Few examples are:
  • Andhra Pradesh:
    • The Government of Andhra Pradesh is committed to providing land at concessional rates, along with 24 hours uninterrupted power supply.
    • Capital subsidy of 50% for common infrastructure in auto clusters and ASMC developers, up to a maximum of USD 3.07 Mn.
    • Financial assistance limited to 75% of the cost, subject to a maximum of USD 38,461 for obtaining patent registration and 50% of all charges, subject to a maximum of USD 7,692 paid for obtaining quality certification. This is applicable to only MSME units.
    • Under Marketing Incentives, 50% of the cost of participation with a maximum amount of USD 7,692 to be reimbursed to a maximum of 10 MSME units per year for participating in international trade fairs.
  • Gujarat:
    • Auto component manufacturers can either avail general incentives under the Gujarat Industrial Policy 2015, or under the scheme for Mega/ Innovative Projects.
  • Jharkhand:
    • Jharkhand introduced Automobile and Auto Component Policy 2016 with an aim to make Jharkhand, a preferred destination for automobile and auto-component manufacturing units.
    • The policy encourages the establishment of Tier-I, Tier-II and Tier-III auto-component manufacturers in the state.
    • Provision of financial assistance of 50% for fixed capital investments in building and common infrastructure up to a maximum of USD 3.07 Mn.
    • 100 % electricity duty exemption shall be provided for 10 years from the date of production.

Export Incentives:

  • Export subsidy is available to exporters as a % of duty credit scrip under Merchandise Exports from India Scheme (MEIS).
  • Additionally, the MEIS Scheme has been extended to additional tariff lines and expanded to 65 countries as per the recommendations by ACMA.

Areas based Incentives:

  • Incentives for units in Special Economic Zones (SEZs) / National Investment & Manufacturing Zones (NIMZs) as specified in respective Acts or setting up projects in special areas like the North-east region, Jammu & Kashmir, Himachal Pradesh & Uttarakhand.
Investment Opportunities

Engine & Engine Parts:

  • New technological changes like turbochargers and common rail systems.
  • Outsourcing to gain traction in the short to medium term.

Transmission & Steering Parts:

  • Replacement market share in sub-segments such as clutches is likely to grow due to rising traffic density.
  • The entry of global players is expected to intensify competition in sub-segments such as gears and clutches.

Suspension & Braking Parts:

  • The segment is estimated to witness high replacement demand, with players maintaining a diversified customer base in the replacement and OEM segments besides the exports.
  • The entry of global players is likely to intensify competition in sub-segments such as shock absorbers.


  • Companies operating in the replacement market are likely to focus on establishing a distribution network, brand image, product portfolio and pricing policy.

Metal Parts:

  • Manufacturers are expected to benefit from the growing demand for sheet metal parts, body & chassis, fan belts, pressure die castings, hydraulic pneumatic instruments in the two-wheeler segment.
  • Leading players in the sheet metal parts sub-segment are in the process of expanding their customer base.

Hybrid & Electric Vehicles Components:

  • It is estimated that there will be a huge demand in India for low-cost hybrid and electric vehicles (EVs) that are suitable for short-distance urban commutes (averaging 50-100 km per trip) and rugged enough to perform reliably in the summer and in the monsoon season in India.

Investment Opportunities

  • Japan Plus is a strategic bilateral initiative between India and Japan to promote, facilitate and retain Japanese investments in India. Invest India helped the companies right from the start and played a major role during the Make in India roadshow. Invest India clarified all queries pertaining to FDI policy, sourcing, GST applications, and other licensing through special sessions and meetings with the top policymakers and government stakeholders. *

Explore projects to invest in Automobile Components sector >

Sector Reports
  1. Year End Review 2022 : Ministry of Heavy Industries
Foreign Investors
  • ZF (Germany)
  • Aisin Seiki Company (Japan)
  • Bosch (Germany)
  • Continental Engines (USA)
  • Delphi (UK) Denso (Japan)
  • FAG (Germany)
  • Magneti Marelli (Italy)
  • TRW (USA)
  • Valeo (France)
  • WABCO (Germany)
  • David Brown/ Bharat Forge
  • Schaeffler
  • Honda
  • MG Motor
  1. Automotive Components Manufacturers Association of India, Industry Statistics, 
  2. Automotive Component Manufacturers Association of India, About ACMA, 
  3. Consolidated FDI Policy,
  4. Factsheet on FDI - April 2000 to December 2021Department for Promotion of Industry and Internal Trade:
  5. Department of Heavy Industries, National Auto Policy
  6. Society of Indian Automobile Manufacturers, Automotive Mission Plan 2016-26: A curtain raiser,
  7. National Automotive Testing and R&D Infrastructure Project
  8. Department of Heavy Industries, Notification of FAME India Scheme Phase-II,
  9. Department of Heavy Industries, Notification of FAME India Scheme Phase-II, 
  10. Income Tax, 
  11. Invest India, 
  12. Department of Heavy Industries
  13. Department of Heavy Industries, Monthly Report,
  14. Department of Heavy Industries

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