Auto Components Manufacturing in India: PLI, OEM Tie-Ups & Export Benefits

India's Auto Components Industry: Market Scale and Trajectory

India's automotive component industry recorded a turnover of INR 6.73 lakh crore (USD 80.2 billion) in FY 2024-25, according to the Automotive Component Manufacturers Association of India (ACMA). This represents a 9.6% year-on-year growth and a near-doubling over five years with a compound annual growth rate of 14%.

The industry's three revenue pillars break down as follows:

The industry is projected to reach USD 200 billion by 2030, driven by domestic vehicle production growth, export expansion (particularly to North America, which absorbs 34% of exports), and the electrification wave creating new component categories.

For foreign manufacturers considering India as a production base, the opportunity is compelling. India's manufacturing cost advantage is 10-25% lower than Europe and Latin America, the government offers direct cash incentives through the Production Linked Incentive (PLI) scheme, and 80% of global OEM Chief Procurement Officers surveyed by Boston Consulting Group are open to expanding procurement from India.

FDI Framework for Auto Components Manufacturing

The automotive components sector permits 100% foreign direct investment under the automatic route. No prior government approval is required, and there are no sectoral caps or conditions. Between April 2000 and June 2026, the automobile sector attracted cumulative FDI of INR 2.60 lakh crore (USD 39.14 billion), representing 5% of total FDI inflows into India.

Entity Structure for Manufacturing

Foreign auto component manufacturers typically establish a private limited company (wholly owned subsidiary) in India. The incorporation process via SPICe+ takes 7-10 business days. Key requirements include:

• At least one resident director (person who has spent 182+ days in India during the financial year)
• FC-GPR filing within 30 days of receiving foreign investment
• GST registration for manufacturing operations
• Import Export Code (IEC) from DGFT if importing raw materials or exporting finished goods
• Factory licence under the Factories Act and state-specific industrial approvals
• Environmental clearance from the State Pollution Control Board (or MoEFCC for large projects)

PLI Scheme for Automobiles and Auto Components: Complete Breakdown

The Production Linked Incentive Scheme for Automobile and Auto Component Industry has a total budgetary outlay of INR 25,938 crore over a five-year performance period (FY 2023-24 to FY 2027-28). As of December 2025, cumulative investment of INR 35,657 crore has been achieved, with INR 2,321.94 crore in incentives already disbursed.

Two Categories of Incentives

Eligibility Requirements

• Domestic Value Addition (DVA): Applicants must achieve a minimum 50% DVA to qualify for incentives — this promotes genuine Indian manufacturing over assembly operations
• Minimum investment threshold: Varies by category and applicant type. For new non-automotive investors in the Component Champion category, the minimum investment is INR 150 crore over the performance period
• Incremental sales: Incentives are calculated on sales above the base year threshold, ensuring that only genuine growth is rewarded

Component Categories Covered

The Component Champion category covers advanced components including:

• Electric vehicle powertrains (motors, controllers, battery management systems)
• Advanced safety systems (ADAS components, sensors, radar units)
• Lightweighting technologies (aluminium and composite parts)
• Engine and transmission components (for new-generation platforms)
• Electronic and electrical systems
• Suspension and braking systems

Notable Approved Companies

Major companies approved under the PLI scheme include Sona BLW Precision, Bharat Forge, Bosch, Delphi-TVS Technologies, Dana Ananda India, Lumax Auto, Minda Corp, Aptiv Components, Maruti Suzuki, Ceat, and Hero Cycles — a mix of Indian majors and foreign-invested companies, confirming that foreign subsidiaries are eligible participants.

Budget Allocation FY 2025-26

The Union Budget 2025-26 allocated INR 2,819 crore for the auto PLI scheme, reflecting the government's continued commitment to the programme. The scheme has attracted proposed investment of INR 74,850 crore against the original target of INR 42,500 crore — a 76% oversubscription.

OEM Supplier Qualification: How to Win Indian and Global Contracts

Becoming an approved supplier to OEMs in India (Tata Motors, Mahindra, Maruti Suzuki, Hyundai Motor India) and global OEMs sourcing from India requires a structured qualification process.

Quality Certifications Required

Supplier Development Process

1. Expression of interest: Register on OEM vendor portals (Tata Motors has the TML Vendor Portal, Maruti uses the MSIL Vendor Development Portal)
2. Technical capability assessment: OEM audit of manufacturing facility, quality systems, and engineering capabilities
3. PPAP submission: Production Part Approval Process — submit sample parts with dimensional reports, material certifications, process flow diagrams, and FMEA documentation
4. Trial orders: Small-batch orders (typically 3-6 months) to validate consistency, delivery reliability, and defect rates
5. Annual contract: After successful trial, move to annual supply agreements with defined volumes, pricing, and quality KPIs

OEM Payment Terms

Indian OEMs typically operate on 60-90 day payment terms. Some offer supply chain financing through their banking partners, which can reduce the effective payment cycle to 15-30 days at a financing cost of 7-9% per annum.

Export Benefits and Market Access

Auto component exports from India have surged from USD 7.4 billion in FY21 to USD 22.9 billion in FY25 — a 209% increase in four years. The government supports exports through multiple incentive programmes.

Key Export Schemes

Free Trade Agreements

India's network of Free Trade Agreements provides preferential tariff access for auto component exports:

• India-ASEAN FTA: Preferential access to Southeast Asian markets — relevant for components supplied to OEM plants in Thailand, Indonesia, and Vietnam
• India-Japan CEPA: Reduced tariffs on auto components exported to Japan (relevant for Japanese OEM global supply chains)
• India-Korea CEPA: Preferential rates for components supplied to Hyundai-Kia's global operations
• India-UAE CEPA (2022): Immediate zero-duty access on 90% of tariff lines — the UAE is a re-export hub for African and Middle Eastern markets
• India-EFTA TEPA (2025): New agreement with Switzerland, Norway, Iceland, and Liechtenstein, with USD 100 billion investment pledge

Export Market Distribution

The government's target is USD 100 billion in auto component exports by 2030, with the sector poised to benefit from the China-plus-one diversification trend as global OEMs seek alternative sourcing locations.

Manufacturing Clusters: Where to Set Up

India has four established auto component manufacturing clusters, each with distinct advantages.

Chennai-Sriperumbudur (Tamil Nadu)

Known as the "Detroit of India," this cluster in Tamil Nadu is India's largest automotive manufacturing hub. It hosts Hyundai, BMW, Royal Enfield, and over 500,000 workers in the auto ecosystem. The Oragadam-Sriperumbudur belt specialises in engines, transmission systems, and castings. Tamil Nadu offers a single-window clearance system through the SIPCOT (State Industries Promotion Corporation of Tamil Nadu) and competitive land costs at INR 1,500-3,000 per sq ft in industrial zones.

Pune-Chakan (Maharashtra)

Maharashtra's western cluster holds a 33% market share in auto components. The Chakan corridor near Pune hosts Tata Motors, Mercedes-Benz, Bajaj Auto, and a deep ecosystem of precision engineering suppliers. The cluster excels in machined components, forgings, and export-oriented production. Maharashtra's MIDC (Maharashtra Industrial Development Corporation) provides developed plots with road, water, and power infrastructure.

NCR-Gurugram-Manesar (Haryana)

The National Capital Region cluster serves Maruti Suzuki (India's largest carmaker), Hero MotoCorp, and Honda. This is the most established cluster for two-wheeler and passenger vehicle components. Proximity to Delhi's logistics infrastructure (Inland Container Depot at Tughlakabad, Delhi Airport) makes this cluster efficient for export logistics.

Sanand-Ahmedabad (Gujarat)

An emerging cluster that has gained momentum with Tata Motors' acquisition of Ford's Sanand facility for EV production. Gujarat offers aggressive state incentives: interest subsidies, stamp duty exemptions, and electricity duty waivers for manufacturing units. The state is positioning itself as India's EV component manufacturing hub.

State-Level Incentive Comparison

EV Component Manufacturing: The Next Growth Wave

India's electric vehicle transition is creating an entirely new category of component demand. The government's FAME III scheme (expected to be announced in 2026) will succeed FAME II and PM E-Drive, further accelerating EV adoption. For foreign auto component manufacturers, the EV pivot opens three high-value segments:

Battery Packs and Battery Management Systems

India currently imports approximately 80% of its lithium-ion cells. The National Programme on Advanced Chemistry Cell (ACC) Battery Storage, with an outlay of INR 18,100 crore, aims to establish 50 GWh of domestic cell manufacturing capacity by 2030. Foreign companies with battery technology can partner with ACC PLI beneficiaries (Reliance New Energy, Ola Electric, Rajesh Exports, Hyundai Global Motors) or establish independent cell-to-pack operations. The PLI auto scheme provides an additional 5% incentive for BEV components on top of the base 8-11% rate.

Electric Motor and Power Electronics

Traction motors, motor controllers, inverters, and on-board chargers represent a component category where India has limited domestic capability. Foreign manufacturers with established EV powertrain technology can command premium positioning — demand for locally manufactured EV powertrains is projected to grow from 500,000 units in FY25 to 3-4 million units by FY30 as domestic EV production scales.

Thermal Management Systems

Battery thermal management (liquid cooling systems, heat exchangers) is a niche where global expertise is scarce in India. Companies like Valeo, Mahle, and Hanon Systems have expanded Indian operations specifically for EV thermal management. New entrants can tap the PLI scheme's Component Champion category for incentives on advanced thermal components.

Supply Chain and Vendor Ecosystem

Raw Material Sourcing

India is largely self-sufficient in ferrous metals (steel, iron castings) and aluminium, with JSW Steel, Tata Steel, and Hindalco providing automotive-grade materials domestically. For specialty materials (high-strength steel, rare earth magnets, semiconductor wafers), import dependency remains high. Key raw material cost benchmarks:

Tier-2 and Tier-3 Supplier Development

India has a deep ecosystem of MSME component suppliers. According to ACMA, approximately 85% of auto component companies are SMEs with turnover below INR 250 crore. Foreign manufacturers can leverage this ecosystem for sub-assemblies, machined parts, stampings, and forgings at significantly lower costs than in-house production. The government's MSME Udyam registration system makes it easy to verify supplier credentials and access government-backed supply chain financing through programmes like TReDS (Trade Receivables Discounting System).

Quality Infrastructure

India's National Accreditation Board for Testing and Calibration Laboratories (NABL) accredits testing facilities that foreign manufacturers can use for component validation. NABL-accredited labs with automotive testing capabilities operate in Chennai, Pune, Delhi NCR, and Ahmedabad. The Automotive Research Association of India (ARAI) in Pune and the International Centre for Automotive Technology (ICAT) in Manesar are the two primary government testing agencies for automotive homologation.

Tax and Compliance Framework for Manufacturers

Corporate Tax

Manufacturing companies incorporated and commencing production before March 31, 2024 can access the concessional corporate tax rate of 15% (effective 17.16%) under Section 115BAB (window for new manufacturing companies closed on 31 March 2024). Companies that missed this window can still opt for the 22% rate (effective 25.17%) under Section 115BAA. The standard rate is 30% (effective 34.94%).

GST on Manufacturing

Auto components attract GST at 18% or 28% depending on the specific component category. Input tax credit is available on raw materials, capital goods, and input services. Exports are zero-rated under GST, and manufacturers can claim refund of accumulated ITC on exports.

Customs Duty on Imported Inputs

Basic customs duty on auto component raw materials (steel, aluminium, copper, plastics) ranges from 5-15%. Advance Authorisation and EPCG schemes eliminate customs duty for export-oriented manufacturers. Companies in SEZs enjoy complete customs duty exemption on all imports.

Annual Compliance Requirements

Manufacturing subsidiaries must maintain comprehensive compliance across multiple regulations:

• Statutory audit and ROC annual filings (AOC-4, MGT-7)
• Transfer pricing documentation and Form 3CEB (if intercompany transactions exceed INR 1 crore)
• FLA return filing by July 15 annually
• Factory Act compliance, labour law returns under the four new labour codes
• Environmental compliance (Pollution Control Board consents, hazardous waste management)
• PF and ESI contributions for all employees

Common Challenges and How to Navigate Them

Land Acquisition

Acquiring industrial land in India can be time-consuming. Recommended approach: purchase developed plots in state industrial development corporation zones (SIPCOT, MIDC, GIDC) where land is pre-approved for industrial use with basic infrastructure. Avoid agricultural land purchases — the conversion process can take 6-18 months.

Power Supply Reliability

While India's power grid has improved significantly, manufacturing units should budget for backup power infrastructure. A 1 MW diesel genset costs approximately INR 1-1.5 crore. Solar rooftop installations (increasingly popular in auto component factories) can reduce grid dependence by 30-40%.

Labour Availability and Skill Gaps

Skilled CNC operators, tool room specialists, and quality engineers are in high demand. Companies establishing greenfield operations should partner with local Industrial Training Institutes (ITIs) and Skill India centres for workforce development. Starting salaries for skilled factory workers range from INR 15,000-25,000 per month, with supervisory roles at INR 35,000-60,000.

Logistics and Freight Costs

India's logistics cost as a percentage of GDP (approximately 14%) is higher than the global average (8-10%). Choose factory locations within 50 km of a major highway (Golden Quadrilateral or expressway network) and within 200 km of a port or ICD for export-oriented production.

Key Takeaways

• India's auto components industry is USD 80.2 billion (FY25) and projected to reach USD 200 billion by 2030, with 100% FDI permitted under the automatic route
• The PLI scheme offers 8-16% incentives on incremental sales for advanced automotive components, with INR 35,657 crore already invested and INR 2,322 crore disbursed
• Exports have grown 209% in four years to USD 22.9 billion, with North America (34%) and Europe (27%) as the largest markets, supported by RoDTEP, Advance Authorisation, and FTA benefits
• Choose your manufacturing cluster strategically: Chennai for scale and OEM proximity, Pune for precision engineering, Gujarat for EV components, NCR for two-wheeler supply chains
• 50% Domestic Value Addition is mandatory for PLI eligibility — plan your supply chain to source materials and sub-components locally from day one

For setting up your auto components manufacturing subsidiary in India — from entity registration to FDI structuring and ongoing compliance — our advisory team supports the complete lifecycle.