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Positive outlook for India’s auto industry amid tech risks:Subhabrata Sengupta
Articles- Dec 27,25
The overall outlook is positive. However, there is a need to take some risks in technology – both from the OEM’s side in trying out new technologies and the suppliers’ side in investing.
What major changes in the auto OEM space in recent years are impacting the market dynamics? (Particularly in India)
The growth of the UV segment has come at the expense of sedans and, to a lesser extent, hatchbacks, while EVs continue to grow or remain steady even after subsidy rationalisation. There is a trend towards larger vehicles in the MHCV segment. Indian OEMs, such as Tata and M&M, are gaining market share, whereas some overseas OEMs, including Skoda-VW, Renault-Nissan, and Honda, are floundering, and others like Ford and GM have exited the PC segment.
The implications of these changes include significant growth for local players, resulting in some blockbuster successes, while some suppliers have incurred losses. With the exit of Ford and GM, deemed exports and overall exports have become more challenging; earlier, obtaining global supplier approval was easier. Despite this, exports still grew by 8 per cent in FY25, although the impact of tariffs may be felt in FY26. Additionally, with the increased use of electronics, ADAS, and other advanced technologies, imports continue to rise (7.3 per cent in FY25), indicating that competency building in key technological areas is still lagging.
How are global challenges disrupting India’s auto supply chain? How are companies in India mitigating these challenges?
It was estimated that US tariffs can hot 8 per cent of Indian auto comp production. The US tariffs have not resulted in an immediate dip in Indian exports – partly because in auto supply chains, change takes time. While some build to print has shifted, more IP-oriented products would gradually shift as new suppliers are onboarded. Some resolutions are welcome.
Regarding the rare earth issue, some resolutions are already under way. In the long term, there may be a need to optimise rare earth usage by looking at alternative technologies. Except for M&M, no OEM was significantly impacted due to the rare earth crisis.
As India negotiates trade agreements with major markets such as the US & EU, what opportunities and challenges do you foresee for auto component makers in expanding their global footprint? What has been the impact of FTAs (or trade agreements) that are already in place with some countries/regions so far?
India will negotiate for and get reasonable duties, especially in EU. However, the elephant in the room remains that Indian companies, with a few exceptions, do not develop technology – they are more build-to-print. Unless that improves (and to be fair, there are a few green shoots), challenges will come up.
The same holds true for imports – we regularly hear complaints about the ASEAN FTA – yet the fact remains that if the domestic industry is competitive (both in cost and quality/technology), no customer would prefer imports. There may be disadvantages in terms of higher input costs (power, cost of capital, some specific RM), where the government would be keen to give a level playing field if properly articulated.
Government initiatives like the PLI scheme and PM-eDRIVE program are accelerating investments in electric mobility. How will these policies influence localisation, value addition, and capacity building for future-ready component manufacturing?
EVs are gaining momentum and here to stay. MSIL entry will further broad-base EVs in 4W. Now EVs are becoming a part of the decision matrix in 2/3W.
However, India is years behind China in EV technology – specifically components. A lot of catch-up is needed.
Looking ahead, what is your outlook for India’s auto component industry?
The overall outlook is positive. However, there is a need to take some risks in technology – both from the OEM’s side in trying out new technologies and the suppliers’ side in investing.
About the author:
Subhabrata Sengupta is a Partner at Avalon Consulting with over 20 years of experience in automotive, engineering, and supply chain strategy. He advises global and Indian clients on business transformation, operational excellence, and growth initiatives, helping companies enhance efficiency, competitiveness, and innovation in dynamic industrial markets.
Automotive Consulting
Strategy
Supply Chain
Operations Excellence
Business Transformation
OEMs
Auto Components
Manufacturing
Cost Optimization
Growth Strategy
India Market
Subhabrata Sengupta
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