India auto ancillary sector poised to benefit from demand upcycle, EV push: Report

New Delhi [India], January 11 : India's auto ancillary sector is entering a favourable phase, supported by a structural demand upcycle, policy tailwinds and rising vehicle content intensity, according to a recent research report by Share India Securities.

Citing industry analysts, the report asserted that the sector is expected to deliver steady growth over the coming quarters, aided by improving domestic vehicle production, export momentum, and gradual margin recovery.

The Indian auto-component industry recorded a turnover of approximately Rs 6.7 lakh crore (around USD 80 billion) in 202525, marking nearly 10 per cent year-on-year growth, as per the report.

Exports reached nearly USD 23 billion, underscoring the increasing competitiveness of Indian suppliers in global markets.

Analysts estimate revenue growth of 7-9 per cent in 2025-26, supported by resilient replacement demand and operating leverage benefits as volumes scale up.

The recent 2025 GST rationalisation to simplified slabs has improved vehicle affordability, indirectly supporting higher volumes for component manufacturers, the report noted.

At the same time, policy initiatives such as the Production Linked Incentive (PLI) scheme continue to encourage localisation, capacity expansion and movement up the value chain, particularly in electronics, EV-linked components and precision manufacturing.

The shift toward electric vehicles is also proving structurally positive for auto ancillaries.

EVs typically require higher electronic, lighting and suspension content per vehicle, which could help component revenue growth outpace overall vehicle production growth over the medium term.

The report also highlighted a basket of auto ancillary companies with healthy balance sheets, consistent cash flows and earnings growth.

While near-term margin volatility from input costs such as steel and aluminium cannot be ruled out, analysts believe easing commodity cycles, partial price pass-through, and operating leverage will support gradual margin expansion.

With rising EV penetration, higher content per vehicle, and strong domestic manufacturing economics, the auto ancillary sector remains structurally well positioned at present, it noted.

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