The ongoing transition to electric vehicles (EVs) is expected to reshape the auto component industry by increasing content per vehicle and creating new avenues for suppliers, according to a recent report by Ambit Capital.

Nevertheless, it also underscored that although the growth of EVs presents a risk to manufacturers reliant on internal combustion engine (ICE) parts, it also creates substantial growth prospects.

Although the shift to electric vehicles represents a significant threat to suppliers reliant on internal combustion engine (ICE) components, it also offers various opportunities for these component manufacturers to supply a) parts for electric vehicles, including lithium-ion batteries, traction motors, controllers, and battery management systems (BMS). Moreover, these suppliers can branch out into EV-oriented components like lithium-ion batteries, traction motors, controllers, and BMS.

Moreover, electric vehicles facilitate the integration of cutting-edge technologies such as regenerative braking, advanced driver-assistance systems (ADAS), and intelligent cockpits, further enhancing suppliers' position in the value chain.

An additional benefit for component manufacturers arises from the heightened demand for specific parts driven by EV architecture. Elements like wiring harnesses, electronic control units (ECUs), and differential assemblies are anticipated to have increased content per vehicle when compared to conventional ICE vehicles.

In the same way, the penetration of passenger vehicles (PVs) is expected to increase from 2.6 percent to 10.4 percent over the same timeframe. Conversely, electric three-wheelers (3Ws) are projected to experience swift uptake, increasing from 22.9 percent in FY25 to almost 68 percent by FY29.

Nevertheless, the report warns that numerous EV parts are presently imported, which could lead to fierce competition, particularly during the initial phases of the EV shift.

Even with the growth potential, the transition to EVs also presents significant risks. Suppliers that rely significantly on engine and certain transmission parts may encounter serious difficulties.

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The report identified three significant challenges for the auto components sector - the USMCA/tariff framework, economic downturn in the EU, and rivalry from Chinese competitors.