India's auto parts industry to clock 10% annual growth on semiconductor, defence, EV push: Goldman Sachs
New Delhi, July 23
India's precision machining and auto parts industry is expected to grow at a 10 per cent annual revenue rate between FY26 and FY30, driven by diversification into sectors such as semiconductors, defence, aerospace, electric vehicles and data centres, according to a Goldman Sachs report.
The report said Indian auto component manufacturers are undergoing a structural transformation by expanding beyond traditional automotive supply chains into adjacent high-growth industries, supported by increasing investments in precision machining, tooling and manufacturing capabilities.
"We expect the Indian auto parts industry, supported by the transition to precision machining, to grow revenue by +7%/+12%/+10% in FY27E/FY28E/FY29E (FY26E to FY30E CAGR of +10%)," the report said. It also projected the industry's EBITDA to grow at a 15 per cent compound annual growth rate during the same period.
According to Goldman Sachs, global initiatives by industrial, automotive and semiconductor manufacturers to diversify supply chains are creating new opportunities for Indian manufacturers. The report said the market has largely viewed these companies as cyclical auto component makers, but a number of manufacturers are now diversifying their product mix to access larger and more resilient profit pools.
The report identified electrification, exports, the upcoming Eighth Pay Commission, the global shift in internal combustion engine (ICE) manufacturing and expansion into industries such as defence, consumer electronics, semiconductors and aerospace as the key drivers supporting long-term growth. It also said India's relatively competitive manufacturing costs and protected domestic market provide additional advantages for component makers.
Goldman Sachs expects the industry's revenue to increase from USD 85.6 billion in FY26 to USD 124.4 billion by FY30. It added that Indian auto component makers are well placed to benefit from higher-value manufacturing opportunities as global companies increasingly seek to diversify supply chains and demand rises for precision-engineered components across multiple industries.
— ANI
Reader Comments
Wow, 10% growth is impressive! But I hope it's not just on paper. With the Modi government's push for Atmanirbhar Bharat, this could be a real game changer for our manufacturing sector. The diversification into defence and semiconductors is smart—less reliance on auto cycles, more stable revenue. Let's see if companies like Bharat Forge and Motherson can really tap into this.
Goldman Sachs report sounds promising, but I'm skeptical. They always paint a rosy picture for foreign investors. Reality is, our component makers struggle with quality consistency and export logistics. And the semiconductor diversification? That needs massive R&D investment, not just fancy press releases.
Imagine Indian auto parts powering EVs globally! 🚗⚡ The mention of the Eighth Pay Commission caught my eye—government employees will have more disposable income, boosting domestic auto demand. But we need better skilling programs for precision machining, not just reliance on cheap labor. China's loss could be our gain if we play our cards right.
Good news for the stock market! But as someone in the industry, I can tell you the ground reality is different. Margins are thin, competition with China is fierce, and many small suppliers are struggling with working capital. The report's 15% EBITDA growth seems optimistic unless the government provides more PLI incentives.
Interesting perspective from my colleague in Mumbai. The shift from traditional IC engines to EVs is definitely reshaping supply chains. India's competitive labor costs and protected market give it an edge over Vietnam or Mexico. I just wonder if the infrastructure—power, ports, logistics—can keep up with this 10% growth target.
The semiconductor angle is very interesting! 🧠 With the government's USD 10 billion chip incentive
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