Auto Sector Set for ₹703 Billion Project Commissioning Between FY27 and FY29

India’s automobile and auto components industry is preparing for a fresh investment phase, with projects worth ₹703 billion expected to be commissioned between FY27 and FY29, according to a report released by Brickwork Ratings. The agency said the sector continues to maintain a stable outlook, backed by robust domestic demand, policy support, expanding manufacturing capacity and improving export prospects.

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The report noted that the upcoming project commissioning forms part of an overall pipeline of 184 projects valued at ₹4.76 trillion, including 70 projects that are currently under implementation. It added that organised players remain well-positioned to fund expansion plans through healthy cash flows while maintaining stable credit profiles.

Capacity Expansion to Support Growth

Brickwork Ratings said policy initiatives such as the Production-Linked Incentive (PLI) scheme and the FAME-III programme are expected to encourage fresh investments across the automotive value chain. Original equipment manufacturers (OEMs) and Tier-I suppliers are also increasing investments in electrification and advanced manufacturing technologies.

Commenting on the outlook, Niraj Rathi, Senior Director at Brickwork Ratings, said the Indian automobile industry is gradually shifting from a volume-led market to a technology-driven manufacturing ecosystem. He added that healthy balance sheets and strong internal accruals are expected to support expansion plans without materially affecting the sector’s credit quality.

Revenue Expected to Grow Steadily

According to the report, the industry is projected to record a revenue compound annual growth rate (CAGR) of around 7.5%, taking total revenue close to ₹26 trillion over the coming years.

Brickwork Ratings expects operating revenue to increase by nearly 8% in FY27. EBITDA margins are also projected to improve to around 14% from nearly 13% in FY26, supported by operational efficiencies and higher production volumes.

It is further stated that firms are increasingly turning to accruals internally to fund their capital expenditure, a trend that should help them boost their leverage position without being uncomfortable with their gearing levels.

Financing should not pose a problem since the debt servicing would continue to be sound even with ongoing investments in production capacity and electric mobility solutions.

Rising Domestic Demand and Adoption of Electric Vehicles

The report further projected that India has achieved sales of 30.2 million units of domestic vehicles and 7.1 million units of vehicle exports in FY26. Furthermore, it is estimated that the proportion of electric vehicles has reached 8.6% in FY26, compared to 0.8% in FY20 due to rapid EV adoption.

The automotive supply chain in India consisting of more than 40,000 component manufacturers is getting the benefits of rising demand for SUVs, improved exports, and electrification.

Industry Faces Several External Challenges

Despite the positive outlook, Brickwork Ratings highlighted several factors that could affect the auto sector’s growth trajectory. This includes the substantial capital needed for EV platforms and batteries, changes in commodity prices, limitations in semiconductors, uncertainty in U.S. tariffs, and declining demand for internal combustion engines in Europe.

Even with these challenges, the agency believes the industry’s strong financial position, supportive government policies and sustained domestic demand will help maintain a stable credit outlook through FY27 while supporting the next phase of investment and capacity expansion.