The electrification of the two-wheeler and passenger vehicle segment in the country presents a ₹1.5 lakh crore plus opportunity in this decade for the Indian auto parts manufacturers, according to analysts at Icra.

The battery-powered vehicles in the two-wheeler segment are expected to account for 1/4th of the volumes by 2030, up from about 6-8 per cent in FY2025. Similarly, electric products will make up about 15 per cent of the passenger vehicle market by 2030, up from a projected 4-6 per cent in FY2025.

“As EV penetration increases, volumes and value in terms of component supply can go up. The Indian electric two-wheeler component market potential is expected at more than ₹1,00,000 crore by 2030 (up from ₹33,000-39,000 crore in FY25), while the electric passenger vehicle component market is expected to be another ₹50,000 crore (up from ₹14,000-15,000 crore) in terms of revenue potential for auto parts makers, said S Vinutaa, Vice President and Sector Head – Corporate Ratings, Icra Ltd during a webinar.

EV supply chain

Currently, only 30-40 per cent of the EV supply chain is localised largely due to the absence of technology, the requirement of high investments and low volumes.

In terms of EV supply chain localisation, there is some traction seen in the motor segment now. But, battery cells, which are high in technology and capital intensity, ECU (electronic control unit), BMS (battery management system) etc are dependent on imports.

“But opportunities are quite significant in parts like motors, and controllers. HVAC and also chassis and the other body parts. But over the long-term, we do expect the high-value components including ECUs and battery cells (which constitute 35-40 per cent of the vehicle cost) should be a good opportunity, said Srikumar, Senior Vice President & Co-Group Head, Icra.

The adoption of EVs could also have a bearing on the aftermarket demand because of fewer moving parts. While some engine payers will lose business as the EV penetration increases, there is immense opportunity to supply to alternative applications and export markets where EV penetration is low.

Capex range

Meanwhile, the auto component industry in the country is likely to incur a capex in the range of ₹20,000-25,000 crore in FY2025, according to Icra estimates.

The proposed capex will be made in new product additions & product development for committed platforms, towards upcoming regulatory changes, development of advanced technological and EV components/ localisation, and capacity enhancement. The capex, as a percentage of sales was very high in the pre-covid year ie, 9.5 per cent in FY2020. In the post-Covid phase, it has been increasing after a dip to 5.5 per cent in FY21. It is estimated at 6-7 per cent in FY24. During the next fiscal, it is likely to touch 7-8 per cent.

Icra projects the auto parts industry to grow by 9-11 per cent this fiscal, aided by healthy domestic demand despite a high base and moderate growth in exports. For FY 2025, the growth is expected to be relatively lower to 5-7 per cent, , with likely moderation in domestic volume growth and a weak outlook for exports.