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Informist, Tuesday, Jul. 7, 2026

 

By Gunjan Rajput and Priyasmita Dutta

 

NEW DELHI – The government must consider a relief package for small and medium-sized auto component makers who are facing pressure on working capital due to higher raw material, energy, freight and labour costs in the wake of the West Asia war, Automotive Component Manufacturers Association of India Director General Vinnie Mehta told Informist Tuesday. The industry body is already in discussions with the government to improve these MSMEs' access to more working capital, he said.

 

"Because of the war, it is not just the input prices that have gone up, the energy costs have also gone up," Mehta said. "Besides, labour is also more expensive...so there's a lot of escalation of costs for suppliers, and that is telling on the working capital, especially for small and medium enterprises," he said in an interaction.

 

According to Mehta, the government could make some concessions for financiers to take an "easier position" in financing auto component-making MSMEs, and consider if the financing of smaller suppliers could be made cheaper as they remain under financial stress. 

 

The West Asia war, leading to India facing its worst energy crisis in decades, also impacted other industries, including the auto parts makers, who rely on input goods to add value and sell domestically or in international markets. As such, Mehta said Indian auto component makers have been lucky that robust domestic demand in the June quarter of 2026-27 (Apr-Mar) has kept the ball rolling for these players amid external sector risks.  

 

Mehta said the current geopolitical tensions have reinforced the need to localise production of input goods, or raw materials, although the process will take time with the industry having a few hurdles to cross. The director general of ACMA explained that while India is scaling up its production, it faces competition from larger markets like China. "We produced 5.6 million cars when China produced 30 million cars. So look at the sheer scale. Why wouldn't somebody invest there?" Mehta asked rhetorically.

 

India also lacks a few technologies that original equipment manufacturers seek in India. On the other hand, the volume of that product is so low that it is not lucrative enough for a component maker to start producing, Mehta said. "A lot of imports are happening in the EV (electric vehicle) space, but also look at the volumes. The EV volumes are very, very small. It does not excite the component maker," he said. "...also, sometimes when the product life cycle is very short, we're not too sure you'll recover your money the next day," he added.

 

These challenges assume importance as import dependency could currently lead to pressures from two sides – supply disruption in the wake of geopolitical conflicts and depreciation of the Indian rupee. "In today's times, with the rupee depreciating, it would be stupid not to focus on localisation," he said.

 

On exports, Mehta said Indian component makers have no option but to comply with evolving regulations and non-tariff barriers in key markets such as the US and European Union's Carbon Border Adjustment Mechanism. Rather than viewing these measures as a disadvantage, companies should seek a relative competitive advantage by becoming more compliant than their peers, he said. 

"You have no option but to be compliant with the law of the land. But the issue is that, compared to the others, your position is very relative. Now interestingly, (US) tariffs apply to all your competitors. So you're not worse off," Mehta added.

 

That said, he added that global challenges are rising rapidly. "The world is becoming more and more insular and inward, and such problems will continue to increase," Mehta said. "The good thing is that we also have a very big domestic market to fall back on." For Indian auto component makers, export contributes a little over 25% of the Industry's turnover.

 

While the Indian auto parts makers are updating themselves to global standards, they are simultaneously adapting to new-age technology on the domestic front, Mehta said. The industry is simultaneously adapting to multiple powertrain technologies, with electric vehicles, hybrids, ethanol-blended fuels and hydrogen expected to coexist. Thankfully, the industry is keeping up with the pace of innovation, leading to no gap in the supply of manufactured goods for domestic use, he said.

 

Mehta added that greater technological capability and localisation of critical inputs such as rare earth magnets will be essential as these transitions progress as well.

 

The auto components' association projected the industry to grow 8-10% in value terms in FY27, although Mehta said this projection is on the "conservative" side. "We are always a little conservative, and we are happy to be proven wrong; but that does not mean one should not be realistic," ACMA's director general said. He said it is safer to be on the conservative side, given the volatile ecosystem that the industry is now functioning in.

 

For FY26 as well, ACMA had projected a growth of 8-10%, but the industry eventually expanded by 12.7%. "I'm happy that it's proven wrong, and I'm happy to be proven wrong again." End

 

Edited by Deepshikha Bhardwaj

 

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