The annual report by the Automotive Component Manufacturers Association of India (ACMA) noted export growth of 5 percent to $24 billion. Europe emerged as the fastest-growing major market at 9 percent during the year, the highest among major regions.
Industry executives attributed the growth of global manufacturers expanding procurement from India and expectations of deeper trade integration with key overseas markets. The industry bets on a series of trade agreements to strengthen India's position in global automotive supply chains and drive the next phase of export growth.
The optimism comes at a time when India is implementing its trade agreement with the UK, effective from July 15th, and advancing negotiations on a free trade agreement with the European Union. Moreover, a broader bilateral trade arrangement with its largest export market for auto components, the United States.
"FTAs are helping us integrate better into the global value chains," ACMA Director General Vinnie Mehta said on Tuesday while presenting the industry's annual performance review. Trade agreements, he said, are creating opportunities for Indian suppliers to participate more deeply in global manufacturing networks rather than merely opening up new export markets.
The UK accounted for about 3 percent of India's component exports and 2 percent of imports in FY26. But ACMA does not expect it to trigger a fresh investment cycle, as it is a relatively small market. "We'll try to expand our footprint out there, but it does not warrant us to make new investments to meet the market opportunity, at least in the short run," Mehta said.
Nonetheless, there’s greater potential in the ongoing India-EU negotiations. Europe accounted for $7.36 billion in component exports in FY26, with 9 percent regional growth, marginally ahead of North America. ACMA's presentation linked the increase to expectations of a favourable trade agreement, which is expected to conclude by the end of the current calendar year, and the expansion of procurement offices in India by European vehicle manufacturers.
Vikram Singhania, ACMA President, added to Mehta’s point that trade agreements should be viewed as long-term enablers of business rather than immediate demand drivers, as new sourcing programmes typically involve lengthy supplier qualification and validation cycles. "Not only does it add new markets, but it builds new confidence. It builds a relationship between two partners," Singhania said.
The industry's longer-term focus, however, remains the United States, which accounted for 26 percent of India's component exports in FY26, followed by Germany at 9 percent, making it the country's largest overseas market. With a proposed bilateral trade agreement between India and the US under discussion, suppliers see scope for further export growth in a market that already buys more than one-fourth of India's component shipments.
The export outlook assumes that India can continue improving localisation and competitiveness. Imports rose 13 percent to $25.4 billion in FY26, significantly outpacing export growth and widening the trade deficit to $1.37 billion. China, Germany and Japan remained the largest sources of imported components, reflecting continued dependence on overseas supplies for several technologies and product categories.
Despite the widening trade gap, ACMA said the industry's medium-term outlook remains positive as global manufacturers diversify supply chains and seek alternative sourcing destinations.