The automotive component manufacturing industry will be the beneficiary of growing demand for electric vehicles in India. Recent FADA retail sales data reveals that cumulative EV sales across four segments – cars, two- and three-wheelers and commercial vehicles – soared by an estimated 686% to 211,398 units in the April-June 2022 period (Q1 FY2022: 26,833 units).

According to market intelligence provider CRISIL Research, revenue of the EV components’ market in India is likely to rev up at a compound annual growth rate of around 76% to Rs 72,500 crore in fiscal 2027 from Rs 4,300 crore last fiscal.

That will take the share of EVs in the overall automotive components market to 9-11% — up from a negligible 1% currently — even as the supply of parts for internal combustion engine (ICE)-driven vehicles also rises.

According to Pushan Sharma, Director, CRISIL Research, “Improving cost viability of EVs versus ICE vehicles, and rising consumer demand for environmentally cleaner mobility will drive the transition to EVs. Among the key auto segments, two-wheelers and passenger vehicles (PVs) are seen driving the transition, with their penetration rising to 19% (from ~2.5% currently) and 7% (from less than 1% currently), respectively, over the next five fiscals. Commercial vehicles, the other large auto segment, will see far lower penetration at ~3% (0.3% currently) because of unfavourable economics.”

The transition to EVs will create both opportunities and challenges for domestic auto component makers, indicates a CRISIL analysis of 220 manufacturers, which account for a-third of the auto components market.

Naveen Vaidyanathan, Director, CRISIL Ratings, said: “EV components such as batteries (60% of EV component revenue by FY2027), drivetrains (15%), electronics (15%) and others (10%) present an opportunity for auto component makers to diversify their revenue base beyond ICE vehicles. Companies are already investing in developing electric components, both with established ICE original equipment manufacturers (OEMs) and with new-age, pureplay EV makers. Almost 90% of the EV component supplies will be for two-wheelers and PVs.”