The ongoing transition to electric vehicles (EV) is expected to significantly reshape India’s auto component industry, according to a recent report by Ambit Capital. While the shift to EVs poses existential risks for suppliers heavily reliant on internal combustion engine (ICE) components, it also opens new avenues for diversification and technological advancement.
The report notes that component makers can pivot towards EV-specific parts such as lithium-ion batteries, traction motors, controllers, and battery management systems (BMS).
In addition, EVs enable the adoption of advanced technologies like regenerative braking, advanced driver-assistance systems (ADAS), and smart cockpits, further boosting the role of suppliers within the evolving automotive value chain.
Surge in Content Per Vehicle
Another advantage outlined in the report is the increased content per vehicle associated with EVs. Components such as wiring harnesses, electronic control units (ECUs), and differential assemblies are expected to experience greater demand compared to traditional ICE vehicles.
India’s EV adoption is projected to grow steadily over the next few years. Electric two-wheeler (2W) penetration is expected to rise from 6.3% in FY25 to 21% by FY29.
Similarly, electric passenger vehicle (PV) penetration is likely to grow from 2.6% to 10.4% during the same period. In contrast, electric three-wheelers (3Ws) are expected to witness rapid adoption, surging from 22.9% in FY25 to nearly 68% by FY29.
Challenges for the Auto Component Industry
Despite the promising growth trajectory, the report highlights key risks that the industry must navigate. Many EV components are currently imported, which could lead to heightened competition during the early stages of the EV transition.
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Suppliers with high dependence on engine and select transmission components may face significant financial strain if they do not adapt quickly to the changing market dynamics.
The report also flags broader macroeconomic and trade challenges that could impact the industry. These include uncertainties stemming from the USMCA/tariff regime, economic weakness in the European Union, and increased competition from Chinese manufacturers.
Given the sector’s reliance on exports to the US and EU, these factors could pose additional headwinds in the near term.
Navigating the Transition
As India’s auto component sector adjusts to the rise of electric mobility, companies that invest in innovation, diversification, and supply chain resilience will be better positioned to capture emerging opportunities.
The transition offers a pathway for suppliers to move up the value chain by embracing advanced technologies and supporting the broader goal of sustainable mobility.