Best Auto Ancillary Stocks in India

best auto ancillary stocks in India

India is a leading player in the global automobile industry. Currently ranked at number four, the Indian automobile industry is likely to reach the 3rd spot among top automobile manufacturing countries in the world by the year 2026.  Besides being the largest manufacturer of tractors globally, India is also the 2nd and 3rd largest manufacturer of buses and heavy commercial vehicles (HCVs) worldwide.

This outstanding achievement of the automobile industry in the country can be accredited to the strong support by auto ancillary companies in India.

In this article let’s take a detailed look at: 

  • What are auto ancillary companies?
  • Size and future growth prospects of auto ancillary sector in India
  • Best auto ancillary stocks in India

What are auto ancillary companies?

Companies which are engaged in the business of manufacturing different auto components are termed auto ancillary companies. The different types of components manufactured by such companies include springs, engine components, suspension, shock absorbers, gears, headlights, axles, wiring systems, chassis, tyres,  lights, battery, pistons, brakes, bearings, wheels as well as air conditioning parts, etc.

Size of the auto ancillary sector in India

The auto ancillary industry in India has witnessed a healthy growth over the last few years expanding by a CAGR of 3.28% over FY16 to FY20 to touch US$ 45.90 billion in FY21.  Going forward, it is estimated that the industry will touch US$ 200 billion by FY26. According to Automobile Component Manufacturers Association (ACMA), the export of auto components from India is expected to touch US$ 80 billion by the year 2026.

While the industry employs over 15 lakh people directly and indirectly, it also contributes around 2.3% of India’s GDP. Favourable government policies and huge domestic market for automobiles and some of the key reasons for making India a preferred destination for investment in the sector.

The industry consists of both organized and unorganized players. While organized players in the segment manufacture high-value precision instruments and cater to original equipment manufacturers (OEMs), players in the unorganized sector are mainly engaged in the manufacture of low-priced products and caters mainly to the aftermarket requirements.

It estimated that an investment amount to US$ 180 billion would be required to meet India’s ambitious goals of electric mobility by the year for production of EVs as well as charging infrastructure development for support the same. This ambitious EV goal set by India translates into a huge opportunity for auto ancillary companies in country.

Best auto ancillary stocks in India

Bosch Ltd.

Bosch Ltd is a top notch player in the segment with a strong product portfolio which includes fuel injection systems, electrical, multimedia systems used in cars, accessories and aftermarket products for automobiles

Motherson Sumi Sytems Ltd.

Motherson Sumi Sytems Ltd. ranks among the top specialized auto component manufacturers OEMs. With a customer base spread across several countries, the company products are used by leading automakers across 6 continents. The company’s product portfolio includes wiring harnesses, mirrors, bumpers, exterior and interior parts plastic parts, dashboards, rubber parts, and HVAC systems.

MRF Ltd.

Incorporated in the year 1946, Madras Rubber Factory (MRF) the largest manufacturer of tyres in India and offers a wide variety of products used in different categories of vehicles. It is also the largest domestic OEM for the automobile industry.

Amara Raja Batteries Ltd.

Amara Raja Batteries is one of the largest battery manufacturers in the country and caters to both industrial and automotive companies. It is also the preferred OEM supplier for several leading automobile manufacturers in the country. The company has a well-established sales & service network across the country and also exports batteries to neighbouring countries in the Indian subcontinent.

Balakrishna Industries Ltd.

Incorporated in the year 1961, Balkrishna Industries Limited is engaged in the business of manufacturing and sale of off-the-road tires used in construction, mining, manufacturing and agriculture business. The company has five state-of-the-art manufacturing units in India and 4 subsidiaries in Europe and North. Through its well-established distribution network, the company sells its products across 130 countries globally.

Minda Industries Ltd.

Established in the year 1992, Minda Industries is the flagship company of the Minda Group. The company is a leading OEM supplier to many top automobile manufacturers in the country as well as abroad. The company’s product offerings include a wide variety of switches including rotary switches, lights, batteries, molded products and related services.

Bottom line

There is huge potential for growth in the auto components sector in India with the industry size expected to touch US$ 200 billion by FY26. There are thousands of companies in the auto ancillary sector in India. While some are listed on the stock markets, some are unlisted. Many of these listed stocks have created significant wealth for investors in the past.  However it is not necessary that a repeat of the same may take place in the future. With the gradual transition from fossil fuel based engines to electric vehicles, few companies which do not adopt to the change may even cease to exist.

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– Written and contributed by Pradeep Sukumaran.

Disclaimer: Stocks listed above are only for information and should not be constituted as a recommendation to invest.

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