India’s auto ancillary industry is projected to reach a market size of ₹10.68 trillion by FY27, driven by strong vehicle production and the shift toward electric mobility. While growth prospects remain positive, investors should monitor risks involving raw material costs and import reliance.
The Indian auto ancillary industry is entering a sustained investment-led growth phase, with projections estimating an 8-9% annual expansion through fiscal year 2027. According to recent data from CareEdge Ratings, the sector’s total market size is expected to increase from approximately ₹9,835 billion in FY26 to ₹10,681 billion by FY27. This growth trajectory reflects the broader strength in domestic vehicle production and a structural shift toward higher-value components within the automotive supply chain.
The sector’s growth is anchored by three primary pillars: strong demand from original equipment manufacturers (OEMs), an increase in the number of components required per vehicle, and a resilient aftermarket for replacement parts. Furthermore, government initiatives and the 'China Plus One' global strategy are helping Indian manufacturers enhance localization efforts and secure a larger footprint in the global supply chain.
A significant factor reshaping the industry is the rapid adoption of electronics and clean mobility platforms. Electric vehicle (EV) penetration in India reached roughly 8.28% in FY26, with annual registrations rising to approximately 2.45 million units. This transition is altering the bill of materials for vehicles. Batteries now account for 40-50% of an EV’s cost, and electronics comprise about 23%—a sharp rise from less than 10% in traditional internal combustion engine vehicles. This shift is creating new revenue streams in power electronics, thermal management, and semiconductor-related components.
In terms of revenue distribution, domestic OEMs currently account for the majority of the sector’s income at 67%. Exports and the aftermarket segment contribute 22% and 11% respectively, with exports projected to reach nearly ₹2.3 trillion by FY27.
While the industry outlook is positive, several risks warrant investor attention. Profitability, although currently supported by operating leverage and the ability to pass on costs to OEMs, remains vulnerable to volatility in raw material and freight prices. Geopolitical developments and evolving trade policies also pose potential challenges. Additionally, the industry continues to rely on imported critical components, such as battery cells and advanced semiconductors. Investors should track how companies manage these supply chain dependencies and whether they can successfully scale their R&D efforts to meet the changing technological requirements of software-defined and electric vehicles.