Auto comp-Engine/Powertrain (ICE)

Pistons, piston rings, engine valves, camshafts, connecting rods, bearings, gaskets, radiators and cooling modules, fuel-injection and carburettion systems, and exhaust and emission-control assemblies, supplied to passenger vehicle, commercial vehicle, tractor and genset engine builders

These are precision parts with genuine manufacturing depth: tightly toleranced components requiring metallurgical capability and long OEM qualification, and engine components account for roughly 20% of India's auto component exports- the second-largest export category- reflecting decades of built-up capability

The entire slate exists to serve an internal combustion engine: this is the one auto-component segment facing outright product obsolescence rather than adaptation- a battery electric vehicle has no pistons, valves, fuel system or exhaust- and no Group A company sits among the thirteen listed constituents

Customers are engine and vehicle OEMs across passenger, commercial, tractor and stationary-engine applications, plus a substantial independent aftermarket serving the existing vehicle parc

The aftermarket is this segment's genuine cushion: engine wear parts are consumables replaced repeatedly over a vehicle's life, the national vehicle parc keeps growing, and the aftermarket expanded 9% in FY26 to about Rs 1.08 lakh crore aided by repair-ecosystem formalisation, giving a revenue stream that persists long after new ICE production peaks

OEM power is unusually adverse here: the vehicle maker imposes annual price-down expectations on a supplier whose long-term volumes it is simultaneously planning to discontinue, so it has little incentive to fund capability the platform will not need

Cost is dominated by alloy steel, aluminium and specialty castings, machining energy and skilled labour, against capital-intensive precision machining lines dedicated to specific engine platforms

Mature amortised platforms carry high contribution margin: tooling and lines on established programmes are already paid for so incremental volumes are profitable, and export competitiveness is real given India's cost position in precision machining

Platform-specific capital becomes stranded as ICE declines: machining lines cannot be repurposed to non-engine products, so utilisation falls faster than revenue and the fixed asset base strands rather than redeploys

Both reinvestment paths are hard to justify: extending ICE capability makes little sense against a shrinking terminal market, while pivoting to EV-relevant components needs entirely different capability and capital this largely small and mid-cap cohort is poorly placed to fund

Near-term growth tracks vehicle and engine production, which remained strong through FY26 as the wider component industry grew 12.7% to Rs 7.59 lakh crore with OEM supplies up 16.3%

The runway is longer than headline EV narratives imply: commercial vehicles, tractors, gensets and hybrids retain combustion engines well beyond passenger-car electrification, hybrids actually add engine content alongside electric drive, Europe was the fastest-growing export destination in FY26, and the aftermarket for hundreds of millions of ICE vehicles generates demand for decades

The terminal-value question is unavoidable: EV components already account for 4.6% of domestic OEM supplies and rising, and every incremental point of EV penetration permanently removes engine content per vehicle rather than merely deferring it, so long-run volume declines even as near-term earnings look healthy

A fragmented segment of small and mid-cap specialists, several with multinational parentage or technical collaborations, competing with global tier-1 engine-component makers and with imports

Barriers protect incumbents and multinational parentage helps: metallurgical know-how, precision machining and multi-year OEM qualification protect existing programmes and underpin exports, while multinational parentage at several constituents provides continued technology access and global aftermarket channels independents lack

Those barriers protect a shrinking pool: new ICE platform launches are slowing globally, so there are progressively fewer qualification opportunities to win, and competitive advantage on a declining platform is worth less each year

The overriding risk is structural product obsolescence, which distinguishes this segment from every other auto-component category

Electrification removes the product entirely: rather than changing it, and platform-specific machining assets cannot be redeployed, so declining volumes convert into stranded capital and falling utilisation

Adverse OEM power and commodity cyclicality compound: the customer is simultaneously the buyer and the party phasing the product out, while exposure to alloy steel and aluminium and the cyclicality of CV and tractor demand add conventional earnings volatility

Offsetting: the aftermarket for an enormous existing ICE parc is durable and margin-accretive, hybrids and commercial vehicles extend the runway materially, and exports at roughly a fifth of national component shipments demonstrate competitiveness that will persist while global ICE production continues