India’s Auto-Component Trade Balance Shifts to Deficit in FY26 Despite Localisation Push

India’s auto component industry shifted from a $453 million trade surplus in FY25 to a $1.37 billion trade deficit in FY26, marking a sharp turnaround of $1.82 billion. According to a report by the Automotive Component Manufacturers Association of India (ACMA) and Boston Consulting Group (BCG), the deficit occurred because imports grew faster than exports during the period.

Imports rose by 13% to reach $25.4 billion, while exports increased by 5% to $24 billion. Concurrently, China’s share in India’s auto component imports increased from 32% to 36%.

This trade reversal comes even as India has successfully localised more than 70% of its conventional automotive-component requirements, up from over 60% a decade ago. Ministry of Commerce data cited in the report shows that India has sharply reduced imports of traditional mechanical parts. For instance, imports of wheels and rims plunged 74% to $60 million in FY26 from $226 million in FY19, while engine imports fell 39% to $416 million from $683 million over the same timeframe. Overall component exports have more than doubled from around $11 billion in FY16 to $24 billion in FY26.

However, the rapid transition toward electrification and electronics-heavy vehicles has opened a new import gap. After a decade of replacing imported mechanical components with locally manufactured alternatives, the sector is facing fresh demand for batteries, electric motors, power electronics, semiconductors, and thermal-management systems—components that barely existed five years ago and areas where India has yet to develop comparable manufacturing depth.

This shift is not limited to electric vehicles. Petrol and diesel vehicles are also increasingly incorporating sensors, electronic control units, displays, connectivity features, and advanced safety systems. As electronics account for a larger share of a vehicle's overall value, historical localisation gains in mechanical components are being tested by the growing dependence on newer technologies.

The reliance on imports deepens when raw materials and intermediate products are factored in. According to BCG-ACMA, China controls approximately 90% of global rare-earth processing, and India sourced about 85% of its rare-earth magnets from China in 2025. Additionally, India imports nearly all of its lithium-ion cells, while battery-grade graphite processing remains overwhelmingly concentrated in China.

Despite the widening deficit, BCG-ACMA estimates that India’s roughly $86-billion auto-component industry could expand to around $200 billion by FY30. Industry observers note that the $1.37-billion deficit does not erase past localisation gains, but rather highlights the technological frontier where the next phase of industrial competition is taking place.

"The shift in India's auto-component trade balance from a surplus to a deficit highlights a critical transition phase in the manufacturing sector. While the industry has achieved commendable success in localising conventional mechanical parts over the past decade, the rapid rise of EVs and electronics-heavy vehicles has created an entirely new dependency on imported technologies like batteries and rare-earth materials. For the Indian startup and manufacturing ecosystem, this challenge presents a massive opportunity to build domestic capabilities in deep-tech, electronics, and supply chain infrastructure to capture future growth up to FY30." — Dr. Shishir Gupta, Founder & CEO, StartupLanes