How strategic diversification is reshaping India’s auto component industry

India’s auto component industry has long been a cornerstone of the country’s manufacturing strength. However, in 2025, the context in which this industry operates is fundamentally evolving. Electrification is accelerating, supply chains are realigning, global OEMs are recalibrating sourcing decisions, and customers are demanding faster innovation and broader solutions.

These shifts signal the decline of ‘business-as-usual.’ The EY report ‘Strategic diversification: Unlocking new revenue pools for auto component manufacturers in India’ delves deeply into this shift, providing a comprehensive perspective on how suppliers can future-proof their business. For automotive suppliers, particularly those that have historically built scale through specialization, this is a moment to re-evaluate long-term strategy. Diversification, when executed with clarity and intent, is proving to be a key enabler of both resilience and long-term growth.

With a structured view, automotive firms are embracing diversification—whether by entering new product categories, serving additional platforms, exploring adjacent industries, or reaching new customers and markets. The study of 52 Indian component companies across various sizes, capabilities and ownership types reveals compelling findings: diversified firms not only grow faster but do so more consistently and with stronger capital efficiency.

Five core themes emerged while assessing how leading companies are diversifying. First, capability diversification is often the starting point—extending technical expertise beyond a single manufacturing process or product family. Second, platform diversification—serving ICE, hybrid, and NEVs simultaneously—allows firms to hedge against technological uncertainty. Third, many are expanding beyond India into global markets, reducing exposure to local demand cycles. Fourth, some are entering adjacent industries like agriculture, defense, and industrial automation, often with minimal re-tooling of existing capabilities. Finally, customer and channel diversification—through direct-to-market models or digital aftermarket platforms—is helping firms build greater commercial independence.

It is important to note that diversification is not being pursued as an opportunistic response. Instead, the best-performing companies are using it as a strategic lever to assess where risk lies, where future demand may emerge, and how they can proactively reshape their portfolios. In some cases, this has involved building new capabilities organically; in others, it has meant forming technical associations, making acquisitions, or launching new business verticals under the same group.

It is also recognized that diversification is not without its challenges. It adds complexity, requires careful governance, and calls for new ways of measuring success. However, these are manageable trade-offs, particularly when compared to the risks of remaining overexposed to a single product, market, or a narrow customer base.

India’s component sector is uniquely positioned to benefit from this shift. With strong manufacturing foundations, an ever-growing base of design and engineering talent, and global OEMs looking to increase localization, the conditions are right for Indian firms to scale beyond legacy roles and become strategic collaborators in the global mobility ecosystem.

However, successful diversification demands more than just intent—it requires strong execution capabilities. Leading organizations are leveraging a range of strategic levers to enter new domains effectively:

• Technical collaborations and acquisitions to rapidly acquire new capabilities
• Customer co-development to de-risk innovation and support alignment with market needs
• Talent redeployment to infuse new verticals with domain specialization
• Digital platforms to unlock direct-to-user channels and tap into aftermarket potential

These enablers not only mitigate execution risk but also enhance agility and keep diversification firmly grounded in core capabilities.

With increasing global interest, supportive policies, and a shifting supply chain landscape, the potential upside is significant—but only for companies prepared to evolve. The future belongs to suppliers who are not just efficient, but resilient; not just capable, but adaptable.

As a call to action for leadership teams, diversification decisions should not be deferred or delegated. They must be rooted in the organization’s capabilities, aligned with its long-term vision, and driven by a clear understanding of where value can be created.