India's auto-component industry to touch $200 bn by 2030: McKinsey

Domestic autocomp sales are projected to grow 7-8 % per annum until financial year 2030

Amid changing global trade patterns, India is emerging as a key player helped by its cost competitiveness and skilled workforce, and the Indian auto-component industry is thus projected to touch $200 billion mark by 2030, a report by McKinsey says.

 

The McKinsey report, titled ‘Shaping the future of India’s auto component industry amid global trade shifts’ highlighted that geopolitical and structural changes have been redrawing global trade patterns, with an estimated $12 trillion to $14 trillion in trade expected to shift across trade corridors by 2035.

 

Despite these challenges, global trade is projected to grow from $33 trillion in 2024 to $42 trillion-$45 trillion by 2035. 

The auto component industry has been heavily impacted by trade corridor shifts.

 

“India is now emerging as a key player in this realignment, helped by its cost competitiveness, skilled workforce, and growing domestic market,” the report said, adding that this is evidenced by a steady expansion of opportunities in the domestic and export markets and a compound annual growth rate (CAGR) of about 10 per cent over the past five years in the Indian auto component industry.

 

With domestic and exports demand rising further, this industry is projected to reach $200 billion by 2030, McKinsey projected. Domestic auto component sales are projected to grow 7 to 8 per cent per year until the financial year 2030, supported by vehicle growth, more parts used per vehicle, and new technologies.

 

India’s auto component export value is projected to reach $70 billion to $100 billion by the financial year 2030.

 

The two pillars driving this growth are a $20 billion to $30 billion internal combustion engine (ICE) export opportunity by 2030 as global markets consolidate, and a 35 per cent CAGR in domestic electric vehicle (EV) sales in line with rising worldwide electrification and connectivity.

 

In an increasingly uncertain landscape, auto players are adopting a supply-chain diversification strategy. They are turning to new sourcing markets to strengthen supply chain resilience in three ways: greater local production, more production facilities, and multi-sourcing and supplier diversification.

 

Companies are expanding their domestic production capabilities to reduce reliance on imported components.

 

For instance, Tier-I component suppliers in India and the leading US rare earth producer are growing in-country manufacturing. Businesses are shifting production capacity to low-risk or cost-effective regions. Top German component suppliers are establishing plants in Mexico, and various Chinese battery manufacturers are setting up production facilities in other Southeast Asian countries. Moreover, companies are transitioning from single-source vendors to a broader supplier network. For example, a major Japanese battery manufacturer is phasing out China-sourced materials in its products. Several US and Japanese automakers have significantly increased component sourcing from non-Chinese vendors.