Auto component industry grows 12.7% in FY26, slips into $1.37 bn trade deficit

The industry exported auto components worth $24 billion, up 5% year-on-year, while imports rose a sharper 13% to $25.4 billion, resulting in a trade deficit of about $1.37 billion. The surge in imports was driven by higher demand for advanced technologies and specialised components, particularly electronics and EV parts. As a result, China’s share in India’s auto component imports increased to 36% in FY26 from 32% in FY25.

Engine components and drive transmission and steering systems accounted for over half of the country’s exports. Imports were also dominated by drive transmission and steering and engine components, which together contributed 56% of total imports. Europe recorded the strongest export growth during the year.

The industry also faced labour shortages, particularly among small and medium enterprises, following the West Asia conflict, which triggered reverse migration as higher energy costs increased the cost of living in towns and cities.

Despite geopolitical uncertainties, ACMA expects the domestic auto component industry to grow 8-10% in the current financial year, supported by domestic demand and exports.

“The first quarter has been a very strong quarter. If we continue to grow as is, there should be no reason why we shouldn’t be able to maintain the growth rate that we have. We can expect 8 to 10% growth for the year,” Vinnie Mehta, Director General, ACMA said.

Growing domestic demand, infrastructure-led economic growth, expanding manufacturing investments, deeper global integration through Free Trade Agreements and increasing global sourcing from India are creating significant opportunities for the sector, Vikrampati Singhania, President, ACMA said.

“Geopolitical challenges such as the West Asia crisis, the tariff situation in the US, the largest export market for the industry, and Chinese trade restrictions are some of the headwinds the industry faces going forward,” he added.

Over the last five years, the industry has more than doubled in size, expanding at a CAGR of 17%, reaffirming the country’s  emergence as a globally competitive automotive manufacturing base.

The US, which absorbs 26% of the country’s auto component exports worth about $7.3 billion, has emerged as another source of uncertainty due to Section 301 investigations by the Office of the US Trade Representative (USTR) into alleged unfair labour practices and overcapacity arising from government subsidies.

Mehta said that the industry body has submitted its responses and is confident that the investigation will not impact the domestic industry. “The auto component industry adheres to all the labour laws and it does not get any subsidy from the government,” he said, noting that only two out of 1,100 ACMA members have received disbursements under the government’s Production Linked Incentive (PLI) Scheme for the Automobile and Auto Component Industry. .

Currently, half of India’s auto component exports to the US attract a 25% tariff, while the remaining half face a 12.5% tariff and are under investigation under Section 301. The tariff hike last year stalled exports to the North American market, with growth remaining flat in FY26 compared with an 8.4% increase in FY25 over FY24.