Auto Component for OEM (Engine) Project Report: Industry Trends, Plant Setup, Machinery, Raw Materials, Investment Opportunities, Cost and Revenue

Note: The regulatory items below outline the typical compliance architecture for this project type. Specific BIS / IS standard numbers, licence thresholds, GST HSN codes, and scheme rates referenced should be verified with the issuing authority (see References & primary sources at the bottom of this page). KAMRIT's compliance team confirms each item against current notifications during project engagement.

Auto component for oem (engine) projects in India take a baseline set of central and state approvals layered with the sector-specific BIS / EIA / PLI overlay. For ₹23.4 crore - ₹253 crore project size, the touchpoints KAMRIT covers are:

• Factory licence under the Factories Act 1948 plus state Boiler Inspectorate approval
• State Pollution Control Board CTE and CTO (Red/Orange/Green/White by category)
• BIS certification for products on the mandatory certification list
• Environmental clearance under EIA 2006 (Schedule 8, project capacity threshold)
• PLI participation across 14 schemes where the project qualifies
• Hazardous waste authorisation under Hazardous Waste Rules 2016
• Import-Export Code (IEC) and DGFT Star Export House registration for export-led units

KAMRIT files and tracks every one of these approvals end-to-end in the Tier 3 Execution Partnership, including dossier preparation, regulator interaction, fee remittance, and the renewal calendar through year three of operations.

<p>The Indian auto component industry operates across a well-structured demand and supply ecosystem, with domestic OEMs accounting for approximately <strong>65% to 70%</strong> of total component sales volume. The sector reached a total turnover of <strong>INR 6.14 lakh crore (USD 74.1 billion)</strong> in FY 2024 and accelerated to <strong>USD 80.2 billion</strong> in FY 2025, recording a <strong>9.6% year-on-year</strong> growth. By FY 2026, the industry turnover is projected at <strong>INR 7.60 trillion (USD 85.9 billion)</strong>, driven substantially by a <strong>16.3%</strong> increase in component supplies to Original Equipment Manufacturers.

The supply chain is bifurcated into an organized sector that commands <strong>80% to 85%</strong> of industry revenue and an unorganized sector contributing the remaining <strong>15% to 20%</strong>. The primary distribution channels are direct Tier-1 supplier-to-OEM assembly line relationships, supplemented by Tier-2 and Tier-3 networks for sub-assemblies and raw material feeds. Geographically, Maharashtra, Tamil Nadu, and Haryana collectively account for <strong>68%</strong> of India's Gross Value Added (GVA) from motor vehicle parts and accessories manufacturing, with the total national GVA from auto parts manufacturing standing at <strong>INR 1,13,358.77 crore</strong> in FY 2023-24.</p><p>Workforce dynamics reflect the sector's transitional nature.

Gasoline engine and engine parts manufacturing workers represent <strong>7%</strong> of total employment in OEM and Tier-1 automotive industries. Approximately <strong>65%</strong> of workers in OEM and Tier-1 automotive manufacturing face moderate workforce transitions due to the differences between internal combustion engine vehicle manufacturing and electric vehicle manufacturing paradigms.</p>

Project-specific demand drivers

• Auto PLI scheme
• EV transition acceleration
• Localisation of imported components
• Two-wheeler electrification
• Commercial vehicle BS-VII compliance

<p>Technology adoption in the OEM engine component manufacturing space is undergoing a structural transformation driven by casting innovations, modular production systems, and artificial intelligence-enabled quality assurance. Megacasting and gigacasting integration has become a defining technology trend in 2025-2026, with OEMs transitioning from traditional multi-part stampings to large-format structural and powertrain-adjacent castings. Ford Motor Company reported that next-generation unicast manufacturing approaches enable approximately <strong>20% fewer parts</strong>, <strong>25% fewer fasteners</strong>, <strong>40% fewer workstations</strong>, and <strong>15% faster assembly times</strong>.

Tesla has similarly advanced large-casting architectures that consolidate what were previously dozens of stamped steel engine bay components into single aluminum castings.</p><p>Modular manufacturing systems represent another critical technological frontier, with automotive OEMs and Tier-1 suppliers deploying flexible production lines, such as systems from JR Automation, to assemble both internal combustion engine (ICE) and electric vehicle (EV) components in parallel on a single factory footprint. This capability is essential as the industry navigates the dual transition of ICE refinement alongside EV ramp-up. AI-powered quality inspection, integrating industrial AI and computer vision systems, is being embedded in engine and component production lines to detect micro-defects in crankshafts, cylinder heads, and forged components that conventional inspection methods may miss.</p><p>In terms of material composition, steel commands a <strong>38.2% market share</strong> as the dominant material for engine and powertrain components, followed by aluminum, iron, and increasingly, high-performance polymers for sensor housings and fuel system components.

Electrification and hybrid powertrain adoption is reshaping component engineering requirements: hybrid and plug-in hybrid electric vehicles represented <strong>28.4%</strong> of new global vehicle sales in 2025, projected to reach <strong>42.1%</strong> by 2033, requiring engine components engineered specifically for frequent start-stop cycles and enhanced thermal management characteristics.</p><p>Sustainability mandates are also gaining regulatory traction. General Motors secured <strong>100% renewable electricity</strong> to power its U.S. sites and facilities by 2025, targeting global operations by 2035. Stellantis is targeting a <strong>47% to 50%</strong> absolute reduction in Scope 1 and Scope 2 greenhouse gas emissions from plants and sites by 2030 (compared to a 2021 baseline), alongside a <strong>70%</strong> share of decarbonized energy across its global footprint by 2030.</p>

For a project scoped at ₹23.4 crore (Tier-2 component set, 2 machining lines) to ₹253 crore (full engine top-end assembly, 6+ lines), KAMRIT recommends a 70:30 debt-equity structure at the lower CapEx tier rising to 60:40 at the upper tier, reflecting IATF ramp-up costs. Primary lender engagement should target SIDBI for the ₹23.4-50 crore band, given its ₹50 crore MSME investment loan ceiling and 6-month processing timeline, supplemented by SIDBI's 2% concession under the Centre's CLCSS (Credit Linked Capital Subsidy Scheme). For the ₹50-253 crore tranche, consortium lending with State Bank of India (working capital limits at 20% of projected sales, tenor 7-10 years) and HDFC Bank (project finance at SBI PLR minus 60-80 bps) provides optimal pricing. ICICI Bank's vendor financing programme is particularly relevant given OEM customer concentration risk. The PMEGP (Prime Minister's Employment Generation Programme) ceiling of ₹2 crore per unit is sub-scale for engine components; CGTMSE (₹5 crore coverage at 0.5% annual guarantee fee) and state-level MSME schemes (Maharashtra's MUDP, Gujarat's GIDM) offer top-up collateral coverage. State scheme top-ups from Rajasthan and Tamil Nadu provide 5-15% capital subsidy on plant and machinery. Working capital cycle of 65-75 days comprises 25-30 day raw material stocking (steel forgings), 15-20 day WIP (machining and heat treatment cycle), and 25-30 day debtors (OEM payment at 45-60 days against delivery).

<p>The sector faces a spectrum of structural, market, and operational risks that investors and operators must carefully assess. The most existential risk is the <strong>electrification transition</strong>. Approximately <strong>65%</strong> of workers in OEM and Tier-1 automotive manufacturing face moderate workforce transitions as EV adoption accelerates, and the structural reduction in engine component content per battery-electric vehicle poses a long-term demand risk for pure-play engine component manufacturers who do not diversify.

Gasoline engine and engine parts manufacturing workers already represent a significant employment base, and the reskilling challenge is substantial.</p><p><strong>Raw material price volatility</strong> remains a persistent challenge. In 2025, shifting cost dynamics driven by raw material volatility affected component pricing across the supply chain. Steel, which commands a <strong>38.2% market share</strong> as the dominant material for engine and powertrain components, is subject to global commodity price swings that directly impact gross profit margins, which currently average <strong>18.64%</strong> at the supplier level.</p><p><strong>OEM margin compression</strong> is another critical risk factor.

OEM EBIT margins have declined to approximately <strong>4.8%</strong> by 2025, down from prior peaks, putting intense cost-down pressure on component suppliers. This dynamic squeezes supplier EBIT margins, which range between <strong>6.03%</strong> and <strong>6.9%</strong>, and net income margins of <strong>4.41%</strong>, leaving limited buffer for further cost absorption.</p><p>Additional risks include <strong>supply chain localization gaps</strong>, where domestic sourcing capability for high-value electronic engine management components and specialty alloys remains below optimal levels, creating dependency on imports that are vulnerable to currency fluctuations and trade policy shifts. The <strong>unorganized sector</strong>, contributing <strong>15% to 20%</strong> of industry revenue, may undercut organized players on price during market downturns, compressing market share.

Technology obsolescence risk is elevated given the rapid pace of casting innovation (megacasting/gigacasting) and AI-driven manufacturing, requiring continuous capital reinvestment that strains the financial capacity of mid-sized suppliers. Finally, the <strong>global automotive engine market CAGR of 2.37%</strong> through 2031 is modest relative to the overall auto components market growth, suggesting engine-specific volumes may underperform the broader sector as EV penetration accelerates.</p>