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Informist, Wednesday, Dec. 24, 2025

 

--ACMA Mehta: India auto parts industry seen growing 8-10% in FY26

--CONTEXT: Comments by ACMA Director General Mehta in interview to Informist

--ACMA: Select CV, tractor parts exports to US fallen to nil due to tariffs

--ACMA: Auto cos, govt must work to prepare tech roadmap for next 5-10 years

 

By Anand JC and Sagar Sen

 

NEW DELHI – The Indian automobile components industry is expected to grow 8–10% in the current financial year ending March, mainly due to strength in the domestic market, which is likely to offset the impact of the weakness overseas, Automotive Component Manufacturers Association of India Director General Vinnie Mehta told Informist in an interview. This growth broadly matches that of 2024-25 (Apr-Mar), when the industry's turnover rose 10% to INR 6.73 trillion.

 

Indian auto parts companies exported goods worth INR 1.92 trillion in FY25, up 9%, with the US, Germany, Turkey and Brazil accounting for roughly 40% of the exports. "2025 has been quite a chequered year (for auto parts' exports) as there have been many challenges," Mehta said. "Especially when you talk about geopolitics, it has hit us pretty much in the face," he said.

 

The US imposed a 50% tariff on Indian imports in August, split evenly between a 25% reciprocal levy and a 25% punitive levy. Automotive components used in cars and small trucks, which account for about 55% of India's auto component exports to the US, face a lower duty of 27.5%, including a 0-2.5% tariff. The remaining 45% of exports, comprising parts used in commercial vehicles and tractors, are subject to the full 50% tariff. The US is India's largest export market for auto components, accounting for nearly 27% of total exports, with Germany a distant second at about 7%.

 

"Exports of CV (commercial vehicles) and tractor parts have come to a nought broadly, at least from ACMA members that I have spoken to, because 50% is too humongous a tariff for anybody to absorb," Mehta said. "And the other category, where the tariff is 25%, they are still dragging their feet on it," he said. South Korea, Japan, and the European Union face lower US tariffs compared with India. "Anecdotally speaking, we haven't displaced China (as an alternative import market) out of the US," Mehta said.

 

These come at a time when India's automobile export destinations have been shrinking. While Indian companies have tried to diversify export destinations, large automotive markets do not currently offer profit-making opportunities. "Japan is shrinking, but they have their own supply base, same as the South Koreans who have established their own supply chain," Mehta said. "Markets globally are not very favourable to you, either because of consumption practices or because of the actual consumption," he said.

 

The Indian automobile parts industry stands to benefit from free trade agreements, such as those with the UK and the United Arab Emirates, which could help ease uncertainty amid a complex geopolitical environment, Mehta said. India is also in talks with the European Union on a similar trade pact, though negotiations have stalled over changes in auditing norms.

 

Under the European Union's Carbon Border Adjustment Mechanism, reporting requirements tightened from 2024, with producers of carbon-intensive inputs such as steel and aluminium increasingly required to disclose actual, verified carbon emissions data, replacing the earlier reliance on default emission values. This shift would raise auditing and compliance costs, hurting Indian companies, especially medium and small-scale players.

 

"That (emission reporting) is still a part of the negotiations that are happening, I guess. That is one of the sore points on the Europe FTA," Mehta said. "I think the government is trying to work out a concession, but I do not know whether it will happen or not. But that is definitely a matter of worry," he said.

 

ROADMAP NEEDED

Policy measures, such as cuts in goods and services tax, income tax, and repo rates, boosted demand for automobiles and components in India in 2025. Mehta said the industry now wants to work with the government on a technology roadmap for the next 5–10 years. "For a lot of the regulations, the components industry sometimes is not prepared, which leads to a lot of imports," he said.

 

Mehta cited the example of India's transition from Bharat Stage Emission Standards-IV to BS-VI norms in April 2020, when stricter emission standards took effect to curb pollution. "We were given very little time to comply with BS-VI (norms), when we did not have the technology. So initially there was a lot of import, but now a lot of localisation is happening," he said.

 

A broader, clearer regulatory roadmap would help the industry better prepare, thereby increasing self-reliance and reducing dependence on imported technologies. "You've seen how the rare earth magnets (shortage) have played out. It leaves you very, very vulnerable if you are solely dependent on a particular country or a geography without a fallback plan. It hits you hard," Mehta said.

 

China, which produces and processes most of the world's rare earth magnets, curbed exports of the raw material earlier this year. Mehta said drafting a roadmap remains challenging as automakers balance the push toward emerging fuel technologies with sustained demand for internal combustion engine vehicles.

 

The Ministry of Heavy Industries had approved a production-linked incentive scheme for the automobile industry in 2021 with an outlay of INR 259.4 billion for five years till March 2027, but the response has been weak. For auto component makers, the main challenge is achieving local value addition, Mehta said, as the policy requires companies to reach at least 50% domestic value addition to qualify for incentives.

 

"We were a little more than ambitious in terms of adding the local value addition criteria. Maybe we should have been a little bit more understanding of the situation on the ground," Mehta said. Global automotive supply chains faced pressure at the time due to COVID-19-driven electronics demand, which led to shortages of key inputs such as semiconductors. Of the 65 companies initially shortlisted for the incentive scheme, only five eventually qualified, Mehta said. "The (COVID-19) pandemic had an impact. It was more like a long, prolonged impact on the supply chain for it to come and normalise. So, a lot of the plans on localisation that people had could not be materialised," he said.

 

EMERGING CHALLENGES

Automobiles have increasingly incorporated electronic components in recent years. Electronics now account for about 30% of a vehicle's parts, up from roughly 18–25% in 2020. According to ACMA, this share is expected to rise to 30–40% even in conventional internal combustion engine vehicles. Mehta urged Indian auto parts makers to increase investment in next-generation electronics while maintaining focus on fuel-powered cars and two-wheelers.

 

"Our country isn't known very well for hardware manufacturing. That is one of the areas where we need to build resilience," Mehta said. "At the nuts and bolts level, at the active and passive components, we still have a lot of work to do," he said.

 

Mehta also called for higher investments in research and development to help the industry build intellectual property and drive long-term growth. ACMA, which represents about 85% of India's automobile parts industry, has around 1,100 member companies. Collectively, they spent 0.7% of turnover on research and development in FY25, compared with 4–7% typically spent by countries with stronger automotive industries.

 

Emerging technologies are also increasing the need for a skilled workforce capable of operating precision equipment at scale. ACMA has been working with the Automotive Skill Development Council to address the issue, though challenges remain. "Honestly, I don't think we've been able to do very much on it. It remains a problem," Mehta said.   End

 

Edited by Vandana Hingorani

 

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