India's auto sector to commission ₹703 billion of projects by FY29: Report

A Brickwork Ratings report said the auto sector's revenue would grow at a compound annual growth rate of around 7.5 per cent to nearly ₹26 trillion over the coming years

India's automobile and auto components sector is set to enter its next investment cycle, with projects worth ₹703 billion scheduled to be commissioned between FY27 and FY29, according to a report released by Brickwork Ratings on Wednesday.

 

The credit rating agency said the commissioning pipeline is part of an overall outstanding pipeline of 184 projects worth ₹4.76 trillion, including 70 projects currently under implementation. It added that the sector would maintain a stable credit outlook through FY27, supported by government incentives, capacity expansion, strong domestic demand and rising exports.

 

Schemes such as the Production-Linked Incentive (PLI) scheme and FAME-III, along with continued investments by original equipment manufacturers (OEMs) and Tier-I suppliers, are expected to drive long-term growth as companies increase spending on electrification, the report said.

   

"India's auto and auto ancillaries industry is transitioning from a volume-driven market to a technology-led manufacturing ecosystem," said Niraj Rathi, senior director at Brickwork Ratings. He added that healthy balance sheets and strong internal accruals should help organised players fund investments while maintaining stable credit profiles.

 

Revenue to grow at 7.5 per cent CAGR

 

The report estimated that the auto sector’s revenue would grow at a compound annual growth rate (CAGR) of around 7.5 per cent to nearly ₹26 trillion over the coming years.

 

It added that operating revenue would rise by around 8 per cent in FY27, while Ebitda margins were projected to improve to about 14 per cent from around 13 per cent in FY26. Leverage is also expected to improve further as companies increasingly rely on internal accruals to fund capital expenditure, keeping gearing at comfortable levels.

 

"The sector's leverage profile is expected to improve further, supported by internal accrual-led funding. Debt servicing is also expected to remain strong, reinforcing the sector's stable credit outlook despite ongoing investments in capacity expansion and electrification," Rathi said.

 

Domestic demand and exports remain key drivers

 

India recorded domestic vehicle sales of 30.2 million units and vehicle exports of 7.1 million units in FY26, the report estimated. Electric vehicle (EV) penetration is estimated to have reached 8.6 per cent in FY26, up from 0.8 per cent in FY20.

 

India's supplier ecosystem, comprising more than 40,000 component manufacturers, is benefiting from strong demand for sport utility vehicles, faster EV adoption and improving export competitiveness across passenger vehicles and two-wheelers, it said.

 

However, the credit rating agency flagged several challenges that could weigh on the sector, including the high investments required for EV platforms and battery technologies, volatile raw material prices, semiconductor supply constraints, uncertainty over US tariffs, and slowing European demand for internal combustion engine (ICE) vehicles.