Budget 2026 Fuels Growth for Diversified Auto Component Industry
While the enhanced allocation for Production-Linked Incentive (PLI) schemes is a welcome development for the automotive component sector, industry experts highlight that the Union Budget 2026-27 may also spur incremental demand through its measures targeting non-automotive segments. As component manufacturers have strategically expanded beyond traditional automobile markets, new avenues are emerging across various industries.
Infrastructure and Manufacturing Push Creates Ripple Effects
The Budget's strong emphasis on infrastructure development, clean energy transition, and domestic manufacturing is expected to enhance capacity utilization in adjacent sectors, thereby offering indirect growth prospects for component producers. Ram Soni, Partner – Mobility, Energy and Transportation at Praxis Global Alliance, emphasized this point, noting that the broader economic initiatives could benefit diversified players.
Over recent years, numerous domestic auto component companies have actively pursued non-automotive revenue streams to safeguard their businesses against the anticipated rise in alternative fuel vehicles, including electric vehicles (EVs). These diversification efforts span industrial applications, aerospace, defence, railways, and construction equipment.
Significant Revenue from Non-Auto Markets
According to estimates by Praxis Global Alliance, more than 30% of organized auto component revenues now originate from non-automotive end markets such as railways, renewable energy, industrial equipment, and electronics. A prime example is Wheels India, a leading auto component manufacturer with a revenue of Rs. 4,425 crore, which now derives approximately one-fifth of its income from non-auto segments after venturing into areas like windmills and construction equipment.
Srikumar Krishnamurthy, senior vice president and co-group head at ICRA, pointed out that with the Union Budget announcing proposals for many of these segments, industry players are likely to reap benefits. These include a focus on advanced manufacturing, high-value capital goods—such as tunnel boring machines, earthmoving equipment, and crane systems—and the development of seven high-speed rail corridors as growth connectors, he explained.
Targeted Schemes Boost Construction Equipment Sector
The proposed Scheme for the Construction and Infrastructure Equipment (CIE) industry, aimed at strengthening domestic manufacturing of high-value and technologically advanced equipment, is anticipated to be particularly advantageous for auto parts suppliers catering to this sector. By fostering a robust construction equipment ecosystem in India, the scheme is poised to drive additional demand for companies operating in this space.
Vinnie Mehta, director general of the Automotive Component Manufacturers Association of India (ACMA), highlighted that while 80% to 90% of industry revenues still stem from the automotive sector, auto component makers are no longer confined to it. They have diversified into multiple non-auto segments in pursuit of new opportunities and risk mitigation. Reflecting this evolution, ACMA has established dedicated chapters for sectors such as aerospace, defence, and railways, among others.
This strategic shift underscores the industry's adaptability and resilience in leveraging Budget 2026's initiatives to fuel growth beyond traditional automotive boundaries.
