India’s Auto Component Industry Poised for a Moderate 8-10% Revenue Growth in FY26: ICRA

Projected growth driven by premiumisation and regulatory changes, ICRA Reports

Prerna Lidhoo  By Prerna Lidhoo calendar 20 Feb 2025 Views icon2879 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
India’s Auto Component Industry Poised for a Moderate 8-10% Revenue Growth in FY26: ICRA

India’s auto component industry is set to witness moderate revenue growth in the next two fiscal years, with ICRA Research projecting a 7-9% increase in FY25 and 8-10% in FY26. This follows a strong performance in FY24 and reflects steady demand, increasing premiumization, and regulatory changes that are driving higher localization and value addition per vehicle.

The domestic aftermarket segment, which includes replacement parts, is projected to grow at a slower pace of 5-7% in FY25, improving to 7-9% in FY26, supported by an aging vehicle fleet and increasing used vehicle sales. 

“Increasing vehicle park, used car sales and the proportion of organized sales increasing continue to support the demand. We expect the FI26 to have a single high-digit growth for replacements for the vehicles that came in the recent years as demand drivers for the replacement demand remain quite stable,” Srikumar K, Senior Vice President and Co-Group Head, Corporate Ratings, ICRA Ltd. said. 

He added that the rural demand has also been picking up and this largely supports the replacement market. There are opportunities for the Indian players in metal castings and forgings. Exports are set to rise by 7-9% in FY25 and 8-11% in FY26, as global automakers continue to diversify supply chains, reducing reliance on China.

Industry growth is being fueled by multiple factors, including the rising trend of premiumiszation, which is leading to greater value addition per vehicle. Changes in regulatory norms are also encouraging higher localiszation—, benefiting domestic suppliers. 
Additionally, India is gaining prominence in the global supply chain, with international OEMs looking at the country as an alternative supplier. Despite the optimistic outlook, potential risks remain, particularly from the increasing adoption of electric vehicles (EVs), which could impact demand for traditional engine and transmission components. 

However, the slower pace of electrification in the heavy vehicle segment and a pullback in EV penetration in developed markets could help mitigate these risks, he adds. 

Tags: ICRA
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