The Indian auto components industry has been a standout in manufacturing, particularly due to its strong export potential. However, the emergence of electric vehicles (EVs) is rapidly reshaping this sector, presenting new challenges and opportunities. Traditional component manufacturers must now adapt to the fast-paced growth in the EV segment, driven by original equipment manufacturers (OEMs). The industry is undergoing significant changes in value chains, assembly lines, and the overall technology of vehicles, transitioning to digital, smart, and electronically advanced cars.
Unlike internal combustion engine (ICE) vehicles, EVs feature batteries and electric motors, which replace traditional engines and transmissions. Batteries are now the largest cost component, accounting for 30-45% of EV costs, with chassis and body contributing another 15-25%. This shift demands a major transformation in the auto components sector, favoring companies that embrace change and threatening those that resist.
EVs comprise several key components, such as the battery pack, battery management system (BMS), electric motor, chassis and body, power electronics, and charging equipment. The battery pack alone makes up 35-45% of the vehicle’s cost, with many of its components still being imported, particularly from China. Semiconductors, crucial to these systems, are entirely import-dependent. The BMS, which ensures battery performance and safety, accounts for 5-10% of the cost. Electric motors, contributing 5-15% of the cost, also rely heavily on imported parts.
Chassis and body components, which are already well-established locally, account for about 15-25% of the cost. Power electronics, vital for functions like inverter operation and regenerative braking, contribute 10-20% of the cost and are largely imported due to a lack of domestic expertise. The remaining cost, 10-15%, covers common components like tires, HVAC systems, and brakes, which leverage existing supply chains. Charging equipment, including DC and AC chargers, also shows varying levels of import dependence.
In FY24, the demand for auto components from OEMs and the aftermarket reached $102 billion, marking a 12% year-on-year increase. The EV auto components market, valued at $4 billion in FY24, grew by 38% from the previous year. By FY30, the overall auto components market is expected to reach $206 billion, with EV components contributing over 22%. The charging equipment market alone is forecasted to grow to $4 billion by FY30. As EVs age and batteries reach the end of their lifespan, the demand for battery replacements in the aftermarket is expected to grow significantly, further driving the market.
The transition from ICE to EV will fundamentally alter the automotive manufacturing value chain, phasing out traditional components like fuel tanks and gearboxes, and introducing new ones like motors, battery packs, and inverters. Currently, OEMs are highly dependent on imports for critical components like semiconductors, BMS, and motors, making them vulnerable to supply chain disruptions. Efforts to localize these components are underway, particularly in BMS and power electronics, although challenges remain in areas like battery cells and electric motors.
The EV battery market is expected to grow from $1.3 billion in FY24 to $14 billion by FY30, with annual battery manufacturing capacity projected to rise from 5 GWh in FY23 to 104 GWh by FY30. Despite these advances, the industry still relies heavily on imported battery cells, highlighting the need for further localization efforts. Battery cell production involves a complex global supply chain, from raw material extraction to recycling. India has the potential to play a significant role in this value chain, especially given the global shift away from China and strong domestic demand for EVs. However, companies must carefully assess their strengths and the profitability of different segments within this value chain.
Several types of battery technologies are currently in use, with lithium-ion batteries being the most widely adopted due to their high energy density and fast charging capabilities. While India has a significant presence in the production of lead-acid batteries, it has limited involvement in more advanced EV battery technologies, representing an opportunity for further investment and growth in this area.
