India's auto-component industry is experiencing rising pressure on manpower and raw materials from fast-growing sectors such as data centres and renewable energy, even as vehicle demand remains strong. According to an Automotive Component Manufacturers Association of India (ACMA) and Boston Consulting Group (BCG) report released at the 66th annual ACMA event, this resource squeeze compounds existing supply-chain disruptions, labour shortages and demand volatility. As reported by BCG partner and managing director Saurabh Chhajer, auto-components in various clusters compete with industries experiencing a super cycle, including data centres, renewables, and common raw materials, creating additional stress through shared manpower requirements. "Auto-components in a lot of clusters compete with quite a few industries which are themselves seeing a bit of a super cycle. So data centres, renewables, and quite a few raw materials in these spaces are common. The need for manpower is common. That's sort of adding to the stress," Chhajer explained.
India's shift towards electric mobility and tech-intensive vehicles is exposing capability gaps among auto component manufacturers, particularly MSMEs, even as imports of batteries, power electronics, embedded software and advanced electronics rise. According to a study by Vector Consulting Group, domestic OEM sourcing of auto components grew 16% to ₹6.6 lakh crore in FY26, while component exports reached ₹2.1 lakh crore. However, imports are growing faster, with China accounting for about 36% of India's auto component imports. The challenge is significant for MSMEs, which account for around 80% of India's auto parts producers, as fewer than half of MSME suppliers are estimated to have advanced engineering, electronics, embedded software and systems integration capabilities.
The capability gap is particularly pronounced in critical technology areas. According to Vector Consulting Group, embedded software capability exists in only about 10% of suppliers and systems integration and product development capabilities in around 14% of MSME suppliers. As Ravindra Patki, Managing Partner at Vector Consulting Group, told The Times of India, "India's automotive opportunity will depend on how quickly capability can be built across the supplier ecosystem. Policy support has an important role in creating the right environment, but it cannot by itself close the capability gap." This technology divide creates additional pressure on shared resources and talent pools as the industry transitions to more complex electric vehicle components.
Despite the operating challenges, demand remains robust across the auto-component sector. ACMA Director General Vinnie Mehta noted strong momentum in the first quarter and July, with original equipment manufacturer (OEM) schedules indicating continued traction heading into the festive season and expectations of another strong financial year. According to Mehta, the industry is facing an unprecedented amount of challenges, with customers becoming very demanding, enabling the vehicle industry to deliver complex products backed by the component industry's support. "The industry is facing an unprecedented amount of challenges. A customer is becoming very demanding, and therefore, the vehicle industry is able to deliver. Backing the vehicle industry is the component industry, and together we are able to meet the complexity of the product and the complexity of the ecosystem," Mehta added.
