Sector

Auto Components

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INDIA SCENARIO

  • India's auto component sector is a vital part of the automotive ecosystem, supporting both domestic and international vehicle manufacturing. It covers a wide range of products and services, contributing 2.3% to India’s GDP and directly employing over 1.5 million people. The sector's turnover in FY24 was Rs. 6.14 lakh crore (US$ 74.1 billion), with domestic OEM supplies making up 54%, and exports contributing 18%. Over FY16-FY24, the industry grew at a CAGR of 8.63%. In FY24, exports reached US$ 21.2 billion, with a trade surplus of US$ 300 million, and are projected to hit US$ 30 billion by 2026.

Uttar Pradesh's Role in the Auto Component Sector

  • Strategic Importance : Uttar Pradesh plays a vital role in auto component manufacturing sector due to its strategic location, SME base, skilled labour, and robust infrastructure.
  • Industry Overview :
    • Home to large OEMs and tier-1 suppliers, along with a vibrant ecosystem of small and medium enterprises (SMEs).
    • Contributes significantly to the state’s economy, particularly in manufacturing, due to proximity to major automobile hubs like Lucknow, Noida, Greater Noida, and Agra.
  • Industrial Clusters : Major clusters in Ghaziabad, Lucknow, Kanpur, Bagpat, Agra host numerous auto component manufacturers, including Tata Auto Comp, Bosch, RACL Geartech and Minda Industries, specializing in gear parts, electronics component, lighting, engine components, tyres etc.
Transportation & Connectivity
  • Well-connected by the Golden Quadrilateral and major national/international airports.
  • Significant portions of the Eastern and Western Dedicated Freight Corridors (EDFC and WDFC) pass through the state.
  • Upcoming international airport at Jewar will be the largest in North India.
  • Existing expressways (Yamuna, Agra-Lucknow) and new projects (Poorvanchal, Bundelkhand Expressways) enhance connectivity.
  • Multi-modal logistics hubs are being developed in Noida, Boraki, and Varanasi, strengthening logistics infrastructure.

SECTOR HIGHLIGHTS

Geographical Clusters
  • Noida and Greater Noida : Major hubs for auto component manufacturing, serving domestic and international markets, with logistical advantages due to proximity to the National Capital Region (NCR).
  • Lucknow and Kanpur: Significant contributions to commercial vehicle and tractor manufacturing supply chains.
Product Range
  • Manufacturers produce a variety of components, including engine parts, transmission systems, suspension systems, electronics, and body components, supplied to leading OEMs in India and abroad.
Export Potential
  • The state is enhancing its export capabilities through infrastructure and government incentives, such as the Product Linked Incentive (PLI) Scheme, which boosts exports and encourages capacity expansion.
  • Global shifts in supply chains are attracting international firms to invest in Uttar Pradesh as an alternative manufacturing hub.
Government Initiatives
  • Policies aligned with the “Make in India” initiative create a business-friendly environment, with Special Economic Zones (SEZs), tax incentives, and improved road infrastructure supporting industry growth.
  • Industrial Areas in Amroha, Ghaziabad and Greater Noida provide a supportive ecosystem for large manufacturers and SMEs.
Growth Drivers
  • Increased vehicle production and a focus on electric mobility (EV) and smart technologies drive demand for advanced components like electronics, batteries, and infotainment systems.
  • Highest number (> 40%) of electric 3-wheelers share in India.
  • Government policies such as GST simplification enhance the ease of doing business, reducing bottlenecks for the industry.

DOMINANT INDUSTRY FORCES

KEY DEVELOPMENT IN THE INDUSTRY

Auto Component
Manufacturing Clusters
  • Industrial clusters in Ghaziabad, Greater Noida, and Kanpur focus on auto component manufacturing, providing specialized infrastructure and market access.
  • The Yamuna Expressway Industrial Development Authority (YEIDA) area near Jewar has attracted investments, especially for electric vehicle (EV) components.
Logistics & Connectivity
Improvements
  • Infrastructure projects like the Eastern Peripheral Expressway and Dedicated Freight Corridors enhance logistics, reduce transportation costs, and improve supply chain efficiency.
Investment Inflows
  • Increased foreign and domestic investment due to favourable policies and incentives, with new auto component manufacturing facilities established in Noida-Greater Noida and Ghaziabad.
Expansion of EV Manufacturing
  • The Uttar Pradesh EV Manufacturing Policy (2022) has spurred investments in electric vehicle components, with major manufacturers setting up units to capitalize on the growing EV market.

POLICIES & SCHEMES

Production Linked Incentive (PLI) Scheme for Automotive Sector

  • National Level Incentive : Introduced by the central government, this scheme offers financial incentives for both vehicle and auto component manufacturers to boost domestic production and export of advanced automotive technology, particularly for electric and hydrogen fuel cell vehicles.
  • Incentive Amount : ₹25,938 crores allocated for this scheme, covering vehicle and component manufacturers over a five-year period.

Electric Vehicle (EV) Incentives (FAME II Scheme)

  • Objective : National-level incentive to promote the adoption of electric vehicles (EVs) and the development of charging infrastructure.
  • Support Offered :
    • Financial assistance to EV manufacturers.
    • Subsidies for suppliers of EV components (e.g., batteries, electric motors).
    • Support for establishing EV manufacturing facilities.
    • Tax incentives for producing EV components.

Key Features

  • Subsidies for Electric Vehicle Purchases
    • Two-Wheelers : ₹5,000 subsidy for the first 200,000 vehicles.
    • Three-Wheelers : ₹12,000 subsidy for the first 50,000 vehicles.
    • Four-Wheelers : ₹100,000 subsidy for the first 25,000 vehicles (limited to cars and buses).
    • Electric Buses : ₹2 million subsidy for the first 400 buses.
    • E-Goods Carriers : 10% subsidy on the first 1,000 purchases, up to ₹100,000 each.
  • Manufacturing of Electric Vehicles.
  • Development of Charging and Swapping Stations.

Incentives

  • 100% exemption on vehicle registration fees and road tax for the first three years, extendable for the fourth and fifth year for vehicles manufactured, purchased, and registered in Uttar Pradesh.

Capital Subsidy

  • 30% capital subsidy (maximum ₹1,000 crore) for two ultra-mega battery projects with a minimum capacity of 1 GWh and investments of ₹1,500 crore.
  • MSME projects receive capital subsidies of up to ₹5 crore (small) and ₹90 crore (large).

KEY INVESTMENT OPPORTUNITIES

  • Electric Vehicle (EV) Components

    Growing Market : The Electric Vehicle Policy 2022 aims to boost local production of EV components (batteries, electric motors, charging stations) with attractive incentives for manufacturers.

    Government Support : The state government is focused on creating an ecosystem for EV manufacturing, offering financial benefits and streamlined processes.

  • Components for Conventional Vehicles

    Diverse Manufacturing : UP can produce various components for conventional vehicles (engines, transmissions, chassis parts), providing multiple investment opportunities.

    OEM Collaborations : Partnerships with major OEMs can enhance growth for tier-1 and tier-2 suppliers, improving local supply chains.

  • Greenfield Manufacturing Projects

    Land Availability : Ready-to-move industrial land is available at competitive rates in key industrial clusters (Noida, Greater Noida, Lucknow).

    Infrastructure Development : Improved logistics and new highways enhance supply chain efficiency and connectivity for manufacturing projects.

  • Infrastructure Development Projects

    Logistics and Connectivity : Significant investments in logistics infrastructure, including roads and transport facilities, improve operational efficiency for investors.

    Industrial Clusters : Clusters in Noida and Greater Noida promote collaboration and resource sharing among auto component manufacturers.

  • Export Opportunities

    Proximity to NCR : UP’s location near the National Capital Region (NCR) provides excellent export opportunities, enabling access to global markets.

  • Policy Support and Financial Incentives

    Business-Friendly Environment : The Single Window Clearance System reduces bureaucratic hurdles and offers various subsidies to encourage new projects.

    Foreign Direct Investment (FDI) : The state actively seeks FDI in the auto component sector, providing a robust framework for international companies.


Nivesh Sarathi Nivesh Mitra