-Sanjay Chavre, Advisor, TAGMA India
This response provides a product-wise breakdown of the Indian automobile supply chain, focusing on production trends, investments, and employment. Based on data from SIAM (Society of Indian Automobile Manufacturers), ACMA (Automotive Component Manufacturers Association), and recent industry shifts as of December 2025, here is the statistical outlook for 2026.
1. Product-Wise Production Trends & 2026 Estimates
The industry is currently in a “Multi-Fuel Transition” phase. While Internal Combustion Engines (ICE) remain the volume drivers, production capacities are shifting rapidly toward EVs and Hybrid technologies.
Production Volume Forecast (Units in Millions)
| Vehicle Segment | FY 2023-24 (Actual) | FY 2024-25 (Est.) | FY 2025-26 (Projected) | Growth Driver for 2026 |
| Two-Wheelers (2W) | 21.47 | 23.88 | 25.50 – 26.20 | Rural recovery & EV penetration (target 8-10%). |
| Passenger Vehicles (PV) | 4.90 | 5.06 | 5.30 – 5.45 | Surge in SUV demand (60% of total PV). |
| Commercial Vehicles (CV) | 1.07 | 1.03 | 1.12 – 1.15 | Infra projects & scrappage policy replacement. |
| Three-Wheelers (3W) | 0.99 | 1.05 | 1.15 – 1.20 | Massive shift (over 50%) to Electric 3W. |
| Total Production | 28.44 | 31.03 | ~33.50 |
2. Investment & Capacity Expansion
The “China + 1” strategy and the PLI (Production Linked Incentive) Scheme have made 2025 a record year for capital expenditure (Capex).
● Fresh Investment (2026): Estimated at ₹25,000 – ₹30,000 Crore specifically for auto components and EV localization.
● Capacity Creation: * Gigafactories: By early 2026, total battery manufacturing capacity is expected to reach 100 GWh (up from 60 GWh in 2024).
○ New Clusters: Major capacity additions are coming online in the Chennai-Hosur belt (EVs) and Gujarat (Semiconductors/PVs).
○ Premiumization: Tooling for sunroofs, ADAS (Advanced Driver Assistance Systems) sensors, and infotainment is seeing the highest investment growth within the supply chain.
3. Employment Statistics
The automotive sector remains one of India’s largest employers, contributing roughly 7.1% to India’s GDP.
● Current Workforce (End 2025): Approximately 32-35 Million (Direct and Indirect).
● 2026 Estimate: Projected to reach 37 Million.
● The “Skill Shift”: While traditional mechanical assembly roles are plateauing, there is a 15-20% surge in demand for technicians skilled in:
○ Electronics & Mechatronics: For EV powertrains.
○ Software Engineering: For “Software Defined Vehicles” (SDVs).
○ Service & Maintenance: Specifically for EV battery diagnostics.
4. Statistical Model Factors for 2026
To build a reliable statistical model for the 2026 supply chain, we look at the following “Connected Data” parameters:
- Export-to-Production Ratio: Growing from 18% to 22%. Component exports are projected to hit $30 Billion by 2026.
- Raw Material Sensitivity: A high correlation remains between production costs and the prices of Steel and Rare Earth Metals (Neodymium/Dysprosium).
- Interest Rate Cycle: Auto sales show a sensitivity of -0.45 to interest rate hikes; a projected RBI rate cut in mid-2026 is expected to boost PV and 2W sales by 3-4%.
5. Summary of 2026 Outlook
Summary: The Indian Auto Supply Chain in 2026 will be characterized by High Value-Addition. Even if unit volume growth is moderate (6-8%), the Turnover growth will be higher (~11-12%) due to “Premiumization”—the shift from small cars to SUVs and from basic bikes to high-performance/electric variants.
Peep into Indian Auto Components and Tooling in 2026
Based on the current industrial roadmap for 2026, the Indian auto-component sector is shifting from “Build-to-Print” (simple parts) to “Build-to-System” (integrated modules). Total fresh investment in the sector for FY2026 is projected by ICRA to be between ₹25,000 – ₹30,000 Crore.
Investment in Tooling (molds, dies, and jigs) typically accounts for 10–15% of the total capital expenditure for traditional parts, but this rises to 18–22% for new-age components due to the high precision required for EV and electronic housings.
Top 10 Auto-Components by Investment Priority (Projected 2026)
| Rank | Auto Component / System | Priority Driver | Est. Fresh Investment (2026) | Est. Investment in Tooling (2026) |
| 1 | EV Battery Packs & BMS | PLI-ACC Scheme / Localisation | ₹7,500 – 8,500 Cr | ₹1,300 – 1,500 Cr |
| 2 | EV Motors & Controllers | Export & Domestic Demand | ₹3,500 – 4,000 Cr | ₹750 – 850 Cr |
| 3 | ADAS & Safety Electronics | New Regulatory Norms (2026) | ₹2,800 – 3,200 Cr | ₹500 – 600 Cr |
| 4 | Aluminum Castings (Lightweighting) | EV Range Extension / Fuel Efficiency | ₹2,200 – 2,500 Cr | ₹450 – 500 Cr |
| 5 | Transmission (Automatic/EV) | Hybrid Adoption / Premiumisation | ₹1,800 – 2,100 Cr | ₹350 – 400 Cr |
| 6 | Sensors & Semiconductors | Software Defined Vehicles (SDV) | ₹1,500 – 1,800 Cr | ₹200 – 250 Cr |
| 7 | Precision Forgings (Suspension) | Infrastructure & CV Demand | ₹1,200 – 1,500 Cr | ₹250 – 300 Cr |
| 8 | Infotainment & Cockpit Systems | Consumer Personalisation | ₹1,000 – 1,200 Cr | ₹150 – 200 Cr |
| 9 | Thermal Management Systems | Battery Safety / Cabin Comfort | ₹800 – 1,000 Cr | ₹140 – 180 Cr |
| 10 | Body-in-White (High Strength Steel) | Crash Safety Ratings (BNCAP) | ₹700 – 900 Cr | ₹180 – 220 Cr |
Key Insights into the 2026 Investment Model
● The “Tooling Premium”: High-precision components like EV Motors and Aluminum Die Castings require significantly more complex molds and dies. Investment in tooling for these segments is growing at a faster rate (14% YoY) than the components themselves (9-10% YoY).
● Localization Push: Under the PLI scheme, companies must achieve 50% Domestic Value Addition. This is forcing Tier-1 suppliers to invest in Indian tool rooms (like IGTR and NTTF mentioned earlier) rather than importing molds from China or Korea.
● New Product Types: 2026 will see the first major wave of Solid-State Battery prototypes and Level 2 ADAS becoming standard in mid-segment SUVs, driving fresh investment in specialized electronic testing tools.
Conclusion: Powering India’s Auto Future Through Tooling Innovation
In 2026, India’s auto supply chain stands at the cusp of transformation, fueled by EV adoption, premiumization, and strategic investments exceeding ₹25,000 Crore. With tooling emerging as a critical enabler—demanding higher precision for next-gen components like battery packs and ADAS—the sector’s shift to “Build-to-System” will boost value addition, employment to 37 million, and exports to $30 billion. Leveraging PLI schemes and local tool rooms, India is poised to not just meet global demand but lead in sustainable, high-tech manufacturing.
About the Author:
Sanjay Chavre, Advisor – TAGMA India
A respected technocrat and policy strategist, Mr. Sanjay Chavre has been a pivotal figure in the evolution of India’s manufacturing and tooling ecosystem. With decades of experience at the intersection of government and industry, he has contributed to the development of forward-looking policies that promote indigenous technology, strengthen domestic capabilities, and uplift MSMEs within the tooling and precision engineering sectors.
Mr. Chavre has held key roles in various government departments and has been instrumental in formulating and executing initiatives that align with India’s long-term vision for industrial growth and self-reliance. His expertise lies in enabling public-private collaboration, fostering innovation ecosystems, and building frameworks that support sustainable industrial development.
In his current role as Advisor to TAGMA India, he continues to guide efforts aimed at enhancing the global competitiveness of Indian toolmakers. His insights have been vital in positioning the Indian tooling industry as a reliable and technologically advanced partner in the global supply chain.
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