Indian Auto Parts Industry Registers Steady Growth Despite Challenges

After a robust 14 per cent growth in fiscal year 2024, the auto parts industry is expected to see a modest 5-7 per cent increase in revenues for the 2025 fiscal year, as per the latest Investment Information and Credit Rating Agency (ICRA) report. 

This projection comes as the sector navigates through a shifting landscape of domestic demand and global economic uncertainties.ICRA forecasts that companies in the industry will likely see a slight improvement in their profit margins next year. This uptick is attributed to increased production efficiency and more components being used in automobiles. The industry is not resting on its laurels, however, with plans to invest between ₹20,000 and ₹25,000 crore rupees in the coming fiscal year to expand capacity and develop new technologies.

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The slower growth projection is partly due to an anticipated moderation in demand from domestic car manufacturers, who are the primary customers for auto components. Additionally, the global economic climate may pose challenges for exports, which constitute a significant portion of the industry's revenue.

Electric vehicles (EVs) represent both a challenge and an opportunity for the sector. ICRA predicts that by 2030, EVs could account for 25 per cent of two-wheeler sales and 15% of car sales in India. Only 30-40 per cent of EV components are manufactured domestically, presenting a substantial growth opportunity for local manufacturers.

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However, the industry faces some headwinds. Recent increases in shipping costs could potentially squeeze profit margins. Moreover, Indian companies lag behind their global counterparts in research and development spending, which could impact long-term competitiveness. Despite these challenges, the auto parts industry remains on solid footing. With continued investment in new technologies and preparations for the EV revolution, the sector is well-positioned to navigate the changing automotive landscape.