Indian auto ancillary industry seen growing 8-9% in FY27: CareEdge

The Indian auto ancillary industry is expected to grow by around 8-9% in FY27, with its market size projected to rise from around ₹9,835 billion in FY26 to ₹10,681 billion, according to CareEdge Ratings report released on Thursday.

The growth is expected to be driven by healthy original equipment manufacturer (OEM) demand, rising component content per vehicle, resilient replacement demand, higher localisation and expanding global sourcing opportunities.

CareEdge Ratings said the industry is entering a sustained investment-led growth phase, supported by increasing domestic vehicle production and higher value addition across the automotive supply chain. The shift towards electronics-intensive and cleaner mobility platforms is also expanding opportunities for component manufacturers, while localisation efforts are helping reduce dependence on imports.

“India's auto component industry has emerged as an increasingly important part of the global automotive supply chain, supported by its manufacturing competitiveness, engineering capabilities, and expanding domestic market,” said Ranjan Sharma, senior director, CareEdge Ratings.

“With the auto ancillary industry market size expected to surpass ₹10.6 trillion in FY27, the sector is well positioned to capture a larger share of global sourcing opportunities,” he added.

The ratings agency said total vehicle production increased from around 23 million units in FY22 to 34.7 million units in FY26, reflecting broad-based growth across vehicle segments. Domestic OEMs accounted for around 67% of auto ancillary industry revenues in FY26, while exports and the aftermarket contributed 22% and 11%, respectively.

Rising preference for SUVs and premium vehicles, along with stricter safety and emission norms, is increasing component content per vehicle and supporting demand for higher-value systems. The aftermarket is also expected to provide stability, supported by an expanding vehicle parc, rising average vehicle age and increasing replacement and maintenance demand.

Exports are projected to rise to approximately ₹2.3 trillion in FY27, further strengthening the industry's integration with global automotive supply chains.

Meanwhile, electric vehicle (EV) adoption is reshaping the component industry. EV registrations increased from around 1.7 lakh in FY20 to 24.5 lakh in FY26, taking EV penetration from 0.71% to around 8.28%.

CareEdge said batteries account for 40-50% of EV costs, while electronics constitute around 23% of the bill of materials, compared with less than 10% in conventional internal combustion engine vehicles. This is creating opportunities in batteries, motors, power electronics, semiconductors, sensors, controllers and thermal management systems.

“The industry's ongoing transition towards electronics-intensive and cleaner mobility platforms is creating new opportunities across EV-linked components, advanced electronics, powertrain technologies, and other high-value automotive systems,” said Arti Roy, associate director, CareEdge Ratings.

The agency expects the aggregate income of the top 50 listed auto ancillary companies to increase from approximately ₹4,325 billion in FY26 to ₹4,714 billion in FY27. Profitability is expected to remain broadly stable, supported by operating leverage, improving product mix and cost pass-through mechanisms with OEMs.

However, raw material and freight cost volatility, evolving US tariff policies, geopolitical developments and continued dependence on imported battery cells, semiconductors and rare earth minerals remain key risks for the industry.