India needs to improve exports to become a preferred manufacturing destination for auto components, says Grant Thornton ACMA report

The Automobile Mission Plan (AMP) 2026 policy aims to develop India as a preferred destination for manufacturing auto components and improving exports will play a major role in achieving this target. According to Grant Thornton ACMA report - Making Indian auto component industry future-ready, the auto component industry will have to take significant measures and steps to convert from being an export deficit industry to an export surplus industry.

The report further says that the dependence on the imports presents itself as both a threat and an opportunity for the Indian auto component manufacturers. Considering the fragmented nature of the Indian auto component industry, Original Equipment Manufacturers (OEs) will look at forming long-term supply contracts with suppliers overseas, therefore putting pressure on local manufacturers. The opportunity for local manufacturers is to understand OEs requirements and move up the value chain while focusing on cost and quality competitiveness.

Commenting on the industry, Vishesh C Chandiok, National Managing Partner, Grant Thornton India LLP said, “The government needs to ensure that it provides a conducive policy environment that boosts industry confidence and attracts capital for local manufacturing and innovation. Clarity on policy and roadmap for industry transition will be critical for OEs and component manufacturers to meet requirements and prioritise resources and efforts. Disruption is the new normal. This is the right time for India’s automotive and auto component industry to display its resilience and capability on the global stage.”

The report highlights that the auto component industry faces headwinds on account of shift of powertrain from Internal Combustion Engine (ICE) to Electric and integration of connected features in vehicle platform due to changing customer needs and requirements. The migration of ICE to Electric Vehicle (EV) powertrain means that OEs would no longer require engine parts and drive transmission components. Component suppliers will have to relook at their product offerings, R&D efforts for developing and supplying electric motors, inverters, converters, rectifiers, EMS (Powertrain Components).

“Auto industry needs to embrace the big ideas and focus beyond Research & Development through collaboration with the start-ups as much of the innovation is originating from the start up community. Evolution in automobile industry is inevitable due to changes in regulation and advancement in technology which is creating disruption leading to both opportunities and challenges for the sector,” said Saket Mehra, Partner, Grant Thornton India LLP.

While the industry needs to adopt disrupting technologies like electric and connected features, it is plagued with several challenges. The report states that it will be challenging for OEs to sell EVs considering infrastructure inadequateness (charging infrastructure).  As far as connected features are concerned, it will be available in luxury platforms. Hence, OEs offering mass market platforms will face pressure in introducing such features.

Furthermore, India lags behind in adopting connected vehicle technologies due to challenges across infrastructure required for V2V and V2I technology roll out, consumer acceptance and awareness levels, maturity level of auto component manufacturers (dominated by tier 2) and regulatory policy.