India's auto component industry experienced a substantial shift in its trade balance, reporting a deficit of $1.37 billion in the financial year 2025-26 (FY26). This marks a sharp contrast to the $453 million trade surplus achieved in FY25, according to data released by the Automotive Component Manufacturers Association of India (ACMA).
China's Growing Dominance in India's Auto Component Imports
Total automobile component imports into India rose by 13% year-on-year, reaching $25.4 billion in FY26. A significant portion of this increase can be attributed to China, which accounted for $9.14 billion of India’s auto component imports in FY26. This represents 36% of the total, up from 32% in the previous financial year.
Vinnie Mehta, Director General of ACMA, acknowledged the trend, stating, "This year, the imports from China have grown. There is no denying that a whole lot of imports happen out of China."
Factors Driving Increased Imports and Trade Deficit
Several factors contribute to India's rising dependence on Chinese auto components:
- Electric Vehicle (EV) Growth: The surge in EV sales in India is a major driver. While ACMA's figures do not include lithium-ion cells or complete batteries, they do encompass critical electronics and components for batteries. Mehta highlighted that the "EV value chain is not localised" and China's EV supply chain is highly price-competitive due to its massive production volumes.
- High Electronics Content: Modern vehicles, particularly EVs, feature significantly higher electronics content. This trend also contributes to increased import volumes, as many advanced electronic components are sourced internationally.
- Localization Challenges: Despite government initiatives pushing for localization, the industry requires a "critical mass of volumes" to make domestic production cost-effective. Mehta expressed optimism that more localization would occur in the coming years as volumes grow.
Export Performance and International Trade Challenges
While imports soared, India's auto component exports did see a 5% year-on-year increase, reaching $24 billion in FY26. However, this growth was not uniform across all markets.
Exports to North America remained flat, largely due to ongoing tariff challenges. "Half of what we supply to the US stands at 25% tariff, and the other half is at 12.5%," Mehta explained. Adding to these concerns, the United States has launched an investigation under Section 301 into Indian auto component exports that attract the 12.5% tariff. This investigation reportedly probes issues related to labor practices and excess capacity due to government subsidies, claims which the Indian government has refuted.
ACMA is actively representing the Indian industry at the United States Trade Representative (USTR) to address these investigations. In contrast to the North American market, Europe recorded the strongest growth in Indian auto component exports during FY26.