India's automotive component industry recorded a turnover of Rs. 760 billion (US$ 7.97 billion) in FY26; however, the period also saw increased dependence on China, which accounted for 36% of total component imports.

Despite the government's Aatmanirbhar (self-reliance) initiative and 12.7% growth in domestic production, the sector recorded a trade deficit of US$ 1.37 billion. The deficit was primarily driven by a 13% increase in imports, which reached US$ 25.4 billion, exceeding the 5% growth recorded in global exports.

In comparison, China accounted for 32% of automotive component imports in FY25 and around 30% in FY24.

Of the US$ 17.75 billion worth of imports originating from Asia in FY26, China contributed approximately US$ 9 billion. This dependence continues despite the industry recording 16.3% growth in supplies to OEMs, supported by domestic vehicle production. The data indicates that categories in which India has export capabilities, including drive transmission, steering and engine components, also account for a significant share of imports, collectively representing 56% of total imports.

Japan and Germany, which rank second and third in terms of import share, account for 11% and 10%, respectively.

The EV and electronics localisation gap

The transition towards electric mobility is contributing to the increase in imports. Vinnie Mehta, Director General of ACMA, stated that while supplies to the EV segment account for 4.6% of total OEM sales, the associated value chain remains largely unlocalised.

"Since the EV value chain is not hugely localised, these items, along with the increase in electronic content in vehicles, are leading to higher imports," Mehta explained.

China produced more than 15 million EVs last year, which has supported the development of a large-scale supply chain. As a result, Indian manufacturers continue to source power electronics and safety components from China, as several of these segments have not yet reached production volumes required to support domestic investment.

Technical gaps and mother plants

The continued reliance on imports is also linked to manufacturing strategies adopted by global automakers. Many companies follow a 'mother plant' strategy, under which specific high-precision components are manufactured at a single global location, often in China or Japan, to achieve production scale.

While India has capabilities in exporting engines for entry-level vehicles, higher-end vehicle segments continue to depend on imported components. "The high-end vehicles are not as localised as perhaps the entry-level and mid segments," Mehta said, citing automatic drivetrains as an example of high-precision components that are not currently manufactured in India at scale.

Geopolitical challenges and labour constraints

The move towards self-reliance is also affected by raw material-related geopolitical challenges. A key concern is the availability of rare earth magnets, with China restricting exports of certain materials used in EV motors. As a result, Indian companies continue to import finished rotors or complete motors rather than increasing domestic value addition.

"Earlier, a certain degree of value addition that was taking place in India for certain items is no longer happening," Mehta said, referring to these sub-assemblies.

The industry is also facing labour shortages across major industrial regions. Vikrampati Singhania, Managing Director of ACMA, stated that the situation is contributing to increased adoption of automation.

"We need to move towards making manufacturing more automated, digitised and robotised to deliver consistent quality," Singhania said, referring to the role of automation in meeting manufacturing requirements.

The way forward

India's automotive component industry aims to reduce the trade deficit; however, FY26 figures indicate that reducing dependence on China's supply chain will require addressing technological gaps, increasing localisation levels and resolving structural challenges within the manufacturing ecosystem.