The government is working on an incentive scheme of more than Rs 5,000 crore for the automobile component industry, aimed at scaling up domestic manufacturing and increasing the country’s share in the global automotive value chain, officials familiar with the matter told FE.
The programme is being formulated by the ministry of heavy industries and is expected to focus on export-oriented, high-value components where India continues to depend heavily on imports.
The proposed scheme is designed to raise the country’s share in the global auto components market from the current 3% to about 8% over the medium term. Officials said the framework under discussion includes two distinct components: operational expenditure support for engines, engine components and transmission systems, and capital expenditure support for tools and dyes.
According to officials, the incentives are intended to bridge cost disadvantages faced by domestic manufacturers while strengthening supply chain resilience at a time when global trade restrictions and localisation policies are increasing.
“Despite being the world’s fourth-largest automobile producer, India accounts for only about $20 billion, or 3%, of global automotive component trade. The intent is to push that share closer to double digits over time. While the final outlay is still being worked out, it will be upwards of Rs 5,000 crore,” a senior government official said.
Another official involved in the discussions said engines, transmission systems and tools and dyes have been prioritised because of their large share in global trade and India’s relatively weak domestic capabilities. Engines, engine components and drive transmission and steering systems together account for nearly 60% of global auto component trade. In tools and dyes, about 30-40% of domestic demand continues to be met through imports, reflecting gaps in scale, precision manufacturing and tooling capacity.
Bridging the Gap
High-value products likely to be covered under the scheme include engine cylinder blocks and heads, pistons and valves, crankshafts and camshafts, as well as transmission gears and axles. The objective is to increase exports in these segments while simultaneously reducing import dependence.
Major companies which operate in the space of manufacturing engine parts include Bosch, Bharat Forge, Denso, Anand, MAHLE, and Precision Camshafts. Similarly, key transmission parts makers are ZF Friedrichshafen, Aisin Seiki, Dana, Schaeffler, and RSB Group. Leading tool and dye makers include Godrej Tooling, Tata Marcopolo Tooling, Orbitol Intelligence, Mahindra CIE, Endurance Group, Undaram Clayton, and Rockman Industries.
India’s limited presence in the global auto component market has been attributed to supply chain inefficiencies, higher raw material and equipment costs, and a weaker footprint in precision-intensive segments such as engines and transmissions. A study by NITI Aayog has estimated that the sector faces a cost disadvantage of nearly 10% compared with China, with manufacturing equipment costs as much as 20% higher, affecting global competitiveness.
Vision 2030
The domestic auto component industry was valued at about $80.2 billion in 2025, a small fraction of the global market, which exceeds $2.1 trillion. Exports have also remained modest at around $20 billion, even though the globally traded market was estimated at roughly $700 billion, or about 30% of total global demand, in 2022.
The government expects the industry to grow to around $145 billion by 2030, with exports tripling to about $60 billion and generating a trade surplus of $25 billion. Officials said the proposed scheme would play a key role in achieving these targets.
So far, most government incentives have been focused on electric vehicles and their components. Engines, transmission systems, and tools and dyes were not covered under the `25,938-crore production-linked incentive (PLI) scheme for automobiles. Officials said components already included under the auto PLI would not be eligible under the new programme, which is expected to complement existing EV-focused policies by strengthening conventional powertrain manufacturing and improving cost-competitiveness.