India's automotive component industry reached a historic turnover of Rs 7.6 lakh crore ($85.9 billion) in FY26, yet the milestone is shadowed by a deepening reliance on China, which now commands a 36% share of all imports. Despite the government’s aggressive Aatmanirbhar (self-reliant) push and a healthy 12.7% growth in domestic production, the sector has slipped back into a trade deficit of $1.37 billion. This deficit is primarily driven by a 13% surge in imports, totaling $25.4 billion, which outpaced a modest 5% growth in global exports.
In comparison, China's share of automotive components stood at 32% in FY25 and around 30% in FY24.
Of the $17.75 billion in imports originating from Asia during FY26, China alone accounts for approximately $9 billion. This dependency persists even as the industry celebrates a 16.3% growth in supply to OEMs due to robust domestic vehicle production. The data reveals a mirror trade irony: the very categories where India shows export prowess, drive transmission, steering, and engine components, are also its primary import liabilities, together accounting for 56% of total imports.
For perspective, Japan and Germany which rank second and third in the import list, account for just 11% and 10% respectively.
The EV and Electronics Localization Gap
The transition to green mobility is currently a major driver of this import surge. Vinnie Mehta, Director General of ACMA, noted that while supply to the EV segment now accounts for 4.6% of total OEM sales, the value chain remains largely un-localized. "Since the EV value chain is not hugely localized, these items and also there is a huge uptick in general electronic content in the vehicles, lead to more import," Mehta explained.
Because China produced over 15 million EVs last year, its supply chain is the most evolved and probably the most price competitive. This forces Indian manufacturers to look East for power electronics and safety items that have not yet reached the critical mass for the minimum production volume required to make domestic investment financially viable.
Technical Gaps and Mother Plants
The persistence of imports is also a result of structural strategies used by global automakers. Many utilize a 'mother plant' strategy, where a specific high-precision component is produced in a single global geography, often China or Japan, to maintain economies of scale.
Furthermore, while India excels at exporting engines for entry-level cars, luxury segments remain dependent on foreign kits. "The high-end vehicles are not as much localized as maybe the entry level and the mid segments," Mehta clarified, citing automatic drivetrains as a key example of high-precision parts not currently made in India.
Geopolitical Roadblocks and Labor Pains
Self-reliance is further throttled by raw material geopolitics. A defining challenge is the rare earth magnet crisis; China has restricted the export of some of these essential EV motor materials. Consequently, Indian firms are forced to import finished rotors or entire motors rather than adding value locally. "What happens is that earlier certain degree of value addition that was happening in India on a certain item is no longer happening," Mehta observed regarding these sub-assemblies.
Internally, the industry faces an acute labor shortage across all major industrial belts. Vikrampati Singhania, MD of ACMA, stated that this shift is driving a pivot toward automation. "We need to move into making manufacturing more automated and digitized and robotized... to deliver consistent quality," Singhania noted, emphasizing that automation is now a requirement to meet global standards.
The Path Forward
As India navigates these challenging times, the goal remains to reverse the trade gap, but the FY26 figures suggest that the road to a China-free supply chain remains paved with technical and structural complexities