India’s ICE auto parts makers stare at uncertainty as new electric order rises

New Delhi: India's auto parts manufacturers are bracing for an uncertain future, as large automakers boost production of electric vehicles (EVs) at the expense of petrol and diesel models, in a shift that is transforming the requirements for components and increasing the role of technology.

Analysts believe that big auto ancillary companies will be able to gain market share and consolidate their position, as small players lack financial muscle to invest and diversify into high-value EV components.

“The number of suppliers in the auto space is set to shrink in the next decade due to the transition to electric vehicles. Big or small, every player in the segment is faced with the task of chalking out a plan of what they will do to fit in the new electric order of the auto space,” Srihari Mulgund, partner-electric vehicle value chain at consulting firm EY-Parthenon, said.

Bosch, Sona Comstar, UNO Minda, Samvardhana Motherson International, and Bharat Forge are some of the large companies competing in India's auto ancillary industry that's estimated at ₹6.14 trillion and provides direct employment to more than 15 lakh people across the country.

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Maruti's joint venture with Japan's Suzuki Motor in the 1980s to produce affordable cars spawned the growth of a number of suppliers, as the then nascent auto sector created its own ecosystem to produce components.

Players manufacturing fasteners, cables, chassis, cells, steering systems, braking systems and many such key components of a vehicle mushroomed in different parts of the country.

Tracxn’s data on the sector suggests that there are more than 2,820 auto component makers in the country today.

Bracing for the EV Transition

The auto components industry was built to cater to the internal combustion engine (ICE) vehicles. However, a 2024 International Forum for Environment, Sustainability, and Technology study pointed that 45-84% of parts of ICE vehicles will become obsolete due to transition to EVs.

The greatest impact will be felt by makers of engine components that gets directly eliminated in EVs. Industry estimates suggest that the powertrain of an ICE vehicle has 600-800 components. An EV, in comparison, is run by an electric motor that sources power from the battery.

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Maruti Suzuki, Tata Motors, Mahindra and Mahindra, Hyundai Motor India, Bajaj Auto, Hero MotoCorp, and others have already begun preparations for electric future. In 2024, over 11 lakh electric two-wheelers and nearly 1 lakh electric cars were sold in the country.

Although still a small portion of the overall car and two-wheeler industry, the growth rate for both segments was more than 20% last year.

“There is palpable anxiety among many auto component makers as the shift to electric vehicle picks up pace. Smaller players with less financial power stare at the possibility of growth fizzling out, which could eventually lead to their closure in the future when EVs make up for a large share of vehicle sales,” said Shoubhik Dasgupta, partner tracking M&A in the auto space at Pioneer Legal, a law firm.

Adapting for the Future

Some players in the industry believe that the manufacturers can protect themselves if they diversify quickly.

“We identified the opportunity and moved into the EV space early to capture a dominant market share in motor control units in the high-speed scooter segment. The industry needs to adapt itself to the changing realities,” Atul Aggarwal, managing director of Faridabad-based Sterling Tools Ltd, India's second-largest fastener maker, said.

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The company is planning to invest ₹100 crore in the next financial year and is also increasing the number of engineers at its tech centre in Bengaluru from 60 to 100. It is planning to manufacture a large share of non-battery components which are required in an EV.

“The transition to EVs is clearly pushing most auto component suppliers to invest in new capabilities. We are seeing a clear momentum in auto ancillary players forging partnerships with companies like ours to upgrade their tech capabilities,” said Taner Gocmez, vice-president and global head, propulsion business at KPIT Technologies, a Pune-based software company providing engineering, research and development services to auto firms.

Alliances and partnerships have increased over the past few years in the auto component space. In January 2025, Chennai-based Rane Group forged a partnership with German tech manufacturing firm ZF.

Moreover, the ACMA Mobility Foundation inked an agreement with German research firm Fraunhofer-Gesellschaft to drive research and development in the component space.

ACMA, or Automotive Component Manufacturers Association of India, is a grouping of the country's auto parts makers.

Besides partnerships with players across the world, Aggarwal believes that the ecosystem needs entry of a player like Tesla to bring its vendor base here. “It can be a Maruti Suzuki-like moment for the electric vehicle ecosystem. Due to the government’s push for local sourcing for all players, component makers will benefit and upgrade their capabilities to meet global standards,” he said.

A Boston Consulting Group (BCG) report early this month suggested that India needs global automakers to set up their base in the country to help auto components industry achieve their target of reaching $100 billion in exports.

The report suggested that the auto component ecosystem is already running a trade surplus, with exports at $21.2 billion and imports at $20.9 billion in FY24.

“Auto component players may look to get increasingly into non-auto spaces as well. Some firms have already started working on projects for other industries to diversify their business,” Neeraj Singhal, CEO of component maker Setco Auto Systems, said.

A Bharat Forge arm inked a partnership in March with Taiwan-based Compal Electronics to manufacture platform servers in India. Motherson Group joined hands with Hong Kong-based BIEL Crystal Manufactory for glass manufacturing for smartphones.

A 9 March Jefferies note said that India's leading auto component players can leverage their experience with global original equipment manufacturers (OEMs) to diversify into electronics space.

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"Rising electronics manufacturing in India has opened a new growth opportunity for auto-component companies... We believe more firms may expand into electronics, which may potentially lift growth outlook and multiples,” wrote Nitij Mangal, Sagar Sahu and Kevin Verghese of Jefferies.

As many as 40 lakh passenger vehicles and 1 crore two-wheelers were sold in India in 2024. With the EVs making up about 10% of total two-wheeler sales and 2.5% of total car sales, analyst expect that there is still time before suppliers start facing the heat on their business models.

“But the clock is ticking for adapting to the demands of OEMs who are bullish about EV future,” EY-Parthenon's Mulgund said.