India's auto-component MSMEs face disruption from EV transition

India's rapid shift to electric mobility is exposing micro, small, and medium enterprises in the auto-component sector to disproportionate risk as ICE-specific parts face obsolescence. With MSMEs representing around 80% of auto-component enterprises, the transition poses an immediate competitiveness and employment challenge for India's manufacturing base.

India, the world's fourth-largest vehicle market with over 37 million automotive jobs, is targeting 30% EV penetration by 2030. EVs grew at a 57% CAGR between 2018 and 2024 and now account for 7.5% of auto sales. This drives change in the auto-component manufacturing (ACM) sector, which reported USD 74 billion turnover in FY 2024. MSMEs represent around 80% of ACM enterprises and contribute roughly 25% of total output, supplying parts to OEMs through tiered production networks.

MSMEs in the auto-component sector are most affected, as a significant share of ICE-specific parts nears obsolescence while the market pivots toward batteries, inverters, traction motors, and other EV-specific components. While OEMs and Tier-1 suppliers pivot more easily due to scale and capital, MSMEs face steeper barriers including high capital costs, limited technical expertise, and a lack of assured EV demand. Most remain hesitant to diversify, risking sector contraction that undermines employment and EV-rollout objectives.

MSMEs should pursue timely investment in production upgrades, retooling, and supply-chain adaptation, as early movers report more robust order books, improved revenue diversification, and access to global export markets. Government support through financial incentives, technology-transfer programs, and skill-development schemes tailored to the MSME segment is urgently needed to prevent exclusion from future value chains. Affected firms should monitor policy interventions aligning with India's 30% EV penetration target by 2030 and responsible-business frameworks.

Key figure — EV target: 30% electric vehicle penetration in India by 2030