Smart Factories Critical for India's Auto Component Sector Growth, ACMA-BCG Study Finds

India's automotive component manufacturers are increasingly embracing smart factory technologies as essential tools for maintaining global competitiveness, according to a joint study released by the Automotive Component Manufacturers Association of India (ACMA) and Boston Consulting Group (BCG).

The ACMA-BCG study, titled "Bolts, Bytes and Bots: Reimagining Next-Gen Auto Component Manufacturing in India," examines how digitalisation, automation and advanced analytics are transforming the sector, which has grown at approximately 14 percent annually over the past five years to reach nearly USD 80 billion.

According to the research, more than two-thirds of surveyed companies have progressed beyond initial experimentation and are now in pilot, scale-up or fully integrated stages of smart factory implementation. Nearly 60 percent report moderate to transformational benefits, including productivity gains, quality improvements and better asset utilisation.

The findings suggest that smart factory adoption has shifted from optional to essential as the industry targets USD 100 billion in exports by fiscal year 2030. Global original equipment manufacturers are increasingly demanding higher standards for quality, traceability, speed and sustainability from Indian suppliers.

"The findings clearly indicate that Smart Factory initiatives are moving from experimentation to execution across the sector," said Vikrampati Singhania, ACMA president. He emphasised that scaling these efforts across plants and supplier ecosystems would require shared platforms and coordinated ecosystem development.

The study, based on industry surveys and discussions with manufacturers across various segments and sizes, highlights a shift from isolated digital pilots to enterprise-wide transformation. Companies that have scaled their deployment beyond pilots are more than twice as likely to achieve strong business impact compared to those still in early stages.

Vinnie Mehta, ACMA director general, noted that digitalisation is increasingly viewed as a long-term competitiveness lever rather than discretionary spending. "As the industry balances export growth, coexistence of multiple powertrains and workforce challenges, smart manufacturing offers a practical pathway to improve reliability, productivity and quality using existing assets," he said.

Technology adoption in the sector is evolving from basic Internet of Things connectivity to more advanced applications including artificial intelligence-based predictive maintenance, digital twins and automation. Operations and quality control have emerged as top priorities for digital intervention, with supply chain management, new product development and environmental sustainability identified as next frontiers.

Vikram Janakiraman, BCG managing director and senior partner, said Indian auto component companies are already realising significant overall equipment effectiveness improvements and quality gains. "Reimagining operations and supply chains, and building factories of the future, will be critical to unlocking the next wave of productivity and competitiveness for the sector," he stated.

The study identifies several success factors for smart factory implementation in the Indian context. Saurabh Chhajer, BCG managing director and partner, emphasised the importance of blending global technologies with India's shopfloor-led innovation, sustained leadership commitment, and focus on data quality, digital skills development and change management.

The research also found that clean, system-generated data and interconnected digital systems significantly outperform isolated point solutions. Digital readiness is becoming a prerequisite for global OEM sourcing due to rising expectations around traceability, audit readiness and zero-defect quality.

The Indian auto component sector has seen exports rise 1.5 times to approximately USD 23 billion, with the industry maintaining a trade surplus of USD 500 million in fiscal year 2025. ACMA represents over 1,064 manufacturers that contribute more than 90 percent of the organized sector's turnover.

Industry observers note that the transition to smart manufacturing comes at a critical juncture as India positions itself as a major player in global automotive supply chains while managing the complexity of multiple powertrain technologies and evolving customer requirements.