India's auto component industry is projected to grow at a compound annual growth rate (CAGR) of approximately 10 per cent through fiscal year 2030, according to a new report by Goldman Sachs, as domestic manufacturers pivot into higher-margin precision engineering segments including semiconductor equipment, defence, aerospace, and data-centre power generation.

The US investment bank estimates sector revenue will climb to $124.4 billion by FY30, up from an estimated $85.6 billion in FY26 — a gain of nearly $39 billion over four years.

EBITDA Growth Outpaces Revenue

Earnings before interest, taxes, depreciation and amortisation (EBITDA) is forecast to expand even faster, at a 15 per cent CAGR over the same period. Goldman Sachs noted that many manufacturers are actively reshaping their product mix and leveraging existing engineering capabilities to maximise margins as India's auto sector enters what the bank described as a 'transformation journey'.

The report argues that the prevailing market perception of these firms — largely as cyclical auto component makers with limited pricing power and recurring capital expenditure demands — 'fails to fully capture their expanding addressable markets.'

Key Growth Drivers: EV, Pay Commission, Exports, Diversification

According to the Goldman Sachs report, growth between FY26 and FY30 will be propelled by several converging forces: domestic electrification, the upcoming Eighth Pay Commission, rising exports, the global migration of legacy internal combustion engine (ICE) component manufacturing to India, and diversification into defence, consumer durables, electronics, semiconductors, and aerospace.

Indian manufacturers are also positioned to benefit from lower labour costs and their established competitiveness in legacy ICE products, with the relatively slower pace of domestic electrification providing a longer runway for traditional component revenue.

Global Supply Chain Shift Creates New Openings

Global efforts to de-risk supply chains are channelling semiconductor, automotive, and industrial buyers toward India, opening opportunities for Indian precision-machining companies across semiconductor wafer-fabrication equipment, EV components, aerospace, defence, and data-centre power generation segments.

The brokerage projected that auto component companies will outperform vehicle manufacturers during the next Pay Commission-led demand cycle. 'Suppliers benefit from higher production volumes across multiple original equipment manufacturers rather than depending on the success of individual vehicle models,' Goldman Sachs said in the report.

Defence and Energy: The Fastest-Growing End Market

The 'others' segment — comprising defence, construction, and energy — is expected to expand at a CAGR of 16 per cent between FY26 and FY30, making it the fastest-growing end market among the sectors tracked by the bank. This segment's outperformance underscores how Indian auto component makers are no longer purely dependent on vehicle demand cycles for growth.

With global OEMs accelerating supply-chain diversification away from single-country dependencies, India's precision engineering base appears increasingly well-placed to capture a larger share of high-value manufacturing contracts in the years ahead.