India's auto component imports have outpaced exports for the first time in three years, according to data from the Automotive Component Manufacturers Association of India (ACMA). The shift is attributed to a surge in demand for electronic components and electric vehicle (EV) parts, with imports from China rising significantly.
Imports rise on electronics and EV demand
Imports of auto components jumped 12% year-on-year to $12.5 billion in the fiscal year ended March 2026, while exports grew only 3% to $11.8 billion. This resulted in a trade deficit of $700 million, reversing the surplus seen in the previous two years. The growth in imports was primarily driven by electronic components such as sensors, controllers, and infotainment systems, as well as parts for electric vehicles like batteries and motors.
China emerged as the largest source of imports, accounting for 35% of total auto component imports, up from 30% a year ago. The share of imports from China rose to $4.4 billion, driven by competitive pricing and availability of specialized parts. Other key import sources include Germany, Japan, and South Korea.
Exports struggle amid global slowdown
On the export front, India's auto component shipments faced headwinds from a global economic slowdown and subdued demand in key markets like the US and Europe. Export growth was primarily supported by increased shipments to emerging markets in Africa and Southeast Asia. The US remained the largest export destination, accounting for 27% of total exports, followed by Germany and the UK.
ACMA President Sunjay Kapur said, "The import growth reflects the industry's rapid transition to electric and connected vehicles, which require advanced electronics that are currently not manufactured domestically in sufficient quantities. We need to boost local production of these components to reduce dependency on imports."
Policy push for domestic manufacturing
To address the widening trade gap, the government has introduced several initiatives under the Production Linked Incentive (PLI) scheme for auto components, with a focus on electronics and EV parts. The PLI scheme offers incentives of up to 12% on incremental sales for manufacturers of advanced technology components. Industry experts believe that these measures could help reduce import dependency by 10-15% over the next three to five years.
However, challenges remain, including high capital costs for setting up manufacturing facilities and the need for skilled labor. The ACMA has urged the government to rationalize import duties on raw materials and provide tax breaks for R&D in electronics and battery technology.
Impact on trade balance and future outlook
The reversal of the trade surplus in auto components is a concern for India's overall trade balance, as the sector has traditionally been a net exporter. The auto component industry contributes about 2.3% to India's GDP and employs over 5 million people. The widening deficit could weigh on the current account deficit, which is already under pressure from high oil imports.
Looking ahead, the ACMA expects import growth to moderate as domestic production of electronics and EV parts scales up. The association projects that imports could grow at 5-7% annually over the next two years, while exports are expected to recover as global demand picks up. The government's focus on local manufacturing and the PLI scheme are expected to play a crucial role in narrowing the trade gap.
