India's auto ancillary industry is set to expand by 8-9 per cent in FY27, with its market size projected to rise from approximately ₹9.835 lakh crore in FY26 to ₹10.681 lakh crore in FY27, according to a report released on Thursday, 13 August by CareEdge Ratings. The growth is underpinned by robust original equipment manufacturer (OEM) demand, rising component content per vehicle, and India's deepening integration into global automotive supply chains.

Key Growth Drivers

The report attributes the industry's momentum to multiple structural tailwinds: healthy OEM demand across vehicle segments, resilient replacement demand, higher localisation of critical components, and expanding global sourcing opportunities. Domestic OEMs remained the primary revenue driver in FY26, accounting for around 67 per cent of industry revenues, while exports and the aftermarket contributed approximately 22 per cent and 11 per cent, respectively.

Total vehicle production climbed from around 23 million units in FY22 to 34.7 million units in FY26, reflecting broad-based growth across segments. India's auto component exports are projected to rise to approximately ₹2.3 lakh crore in FY27, as global automakers increasingly look to diversify supply chains.

SUV Boom and Stricter Norms Boost Component Value

The growing consumer preference for SUVs and premium vehicles, alongside tightening safety and emission regulations, is pushing up the average component content per vehicle. This trend is directly supporting demand for higher-value systems — from advanced electronics to complex powertrain assemblies — benefiting component manufacturers capable of moving up the value chain.

Ranjan Sharma, Senior Director at CareEdge Ratings, noted that 'India's auto component industry has emerged as an increasingly important part of the global automotive supply chain, supported by its manufacturing competitiveness, engineering capabilities, and expanding domestic market.' He added that continued progress in localisation of critical components and development of advanced manufacturing capabilities will be key to enhancing value addition and strengthening India's long-term position globally.

EV Transition Opens New Opportunities

Electric vehicle adoption has accelerated sharply, with overall EV registrations surging from around 1.7 lakh vehicles in FY20 to 24.5 lakh vehicles in FY26. EV penetration has correspondingly risen from 0.71 per cent to approximately 8.28 per cent over the same period.

Arti Roy, Associate Director at CareEdge Ratings, said the industry's shift towards 'electronics-intensive and cleaner mobility platforms is creating new opportunities across EV-linked components, advanced electronics, powertrain technologies, and other high-value automotive systems.' Localisation initiatives are simultaneously reducing import dependence across segments.

Investment-Led Phase Ahead

The domestic auto ancillary sector is entering what the report describes as a sustained investment-led growth phase, supported by expanding domestic vehicle production and increasing value addition across the supply chain. The transition towards cleaner mobility platforms is broadening the addressable market for component manufacturers, while localisation drives create fresh opportunities to capture domestic demand that was previously met by imports.

How effectively Indian component makers scale up advanced manufacturing capabilities — particularly in semiconductors, EV electronics, and safety systems — will determine whether the industry consolidates its gains or cedes ground to global rivals as the automotive landscape transforms.