<h2>Introduction</h2>India's auto component industry, a crucial pillar of India's $70 billion automotive ecosystem, now stands at a technological crossroads. As the future of automotive fuels remains uncertain, OEMs (Original Equipment Manufacturers) are rapidly diversifying into electric vehicles (EVs), hydrogen, biofuels, and hybrid technologies. Alongside this shift, innovations such as connected and autonomous vehicles are further expanding the scope of transformation. However, the true enablers of this transition are the component suppliers, whose role in navigating this changing landscape is indispensable. For component manufacturers, survival itself has become a challenge. A study by iFOREST(4) estimates that 45%-84% of ICE auto parts could become obsolete as India accelerates EV adoption. The challenge now is this: How can component manufacturers ride the tide of change while not completely walking away from ICE parts?<figure class="image"><img style="aspect-ratio:16660/8675;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1771925172.png" width="16660" height="8675"></figure> While the burden of developing new products and technologies for new energy sources is undeniable, the impact is not the same for all component manufacturers. Depending on their core competencies, these manufacturers are adopting different strategies to ensure business sustainability. Broadly, they fall into three categories:<figure class="image"><img style="aspect-ratio:16660/8065;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1771925303.png" width="16660" height="8065"></figure> While manufacturers that belong to Type-3 can continue their current operations with improvements, those in Types 1 and 2 face an existential challenge.<figure class="image"><img style="aspect-ratio:16660/8619;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1771925803.png" width="16660" height="8619"></figure>It is clear that a significant number of Indian auto component manufacturers recognise the urgent need to shift towards alternative fuel-based vehicles. The component manufacturers in Types 1 and 2 have to completely reinvent their portfolios in line with changing market demands. They have to be agile in developing products they have never manufactured before, as per the requirements of the OEMs. In many cases, they must have Proof of Concepts (POCs) and samples of these new components ready before approaching prospective customers.However, working on future market trends while simultaneously managing the development of the existing product portfolio is an uphill battle. The complexities are highlighted in the next section. <h2>Friction in focus: The conflict of commitments</h2><figure class="image"><img style="aspect-ratio:16655/7972;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1771925916.png" width="16655" height="7972"></figure>For most Type-1 suppliers looking to diversify into EV-related components, current customer demand for such parts is virtually non-existent. These suppliers must proactively approach customers with ready-made offerings or samples to demonstrate their capabilities; otherwise, they will not even be considered during the RFQ process. At the same time, they must continue developing their existing portfolio to meet ongoing OEM demand. As a result, they often find themselves spread too thin. From time to time, new products with no existing demand take a backseat to the urgent development needs of the existing portfolio, which come with clear customer due dates.<figure class="image"><img style="aspect-ratio:16669/8878;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1771926185.png" width="16669" height="8878"></figure> <figure class="image"><img style="aspect-ratio:1998/1046;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//6-artboard-8-copy-4-2_1771926252.jpg" width="1998" height="1046"></figure>This operational tension marks only the beginning of a deeper set of systemic issues. <h2>Racing against time: Dependency on Tier-2 vendors</h2>The rise of EV start-ups and tech-driven new-age players has disrupted the traditional automotive market, forcing legacy OEMs to accelerate EV production to maintain their market share. This pressure trickles down to component manufacturers (Tier 1-suppliers), who must match the pace through stringent timelines, accelerated testing, and concurrent engineering alongside OEMs.OEMs expect component manufacturers to adhere to agreed APQP (Advanced Product Quality Planning) timelines despite delays in receiving critical inputs from OEMs at each stage/phase of the component development process. <figure class="image"><img style="aspect-ratio:16669/8688;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1771926359.png" width="16669" height="8688"></figure>The hardest hit are the Tier-2 vendors, primarily SMEs (Small and Medium Enterprises), which constitute 97% of the Indian auto component sector. These firms often lack the financial and technical capacity to adapt quickly to EV-compatible components, making them highly vulnerable to industry shifts. The pressure from Tier-1 component manufacturers eventually trickles down to these Tier-2 vendors, who find themselves struggling to keep pace with the evolving requirements of their customers. When the receipt of child parts from downstream suppliers (Tier-2 vendors) is delayed, Tier-1 suppliers are forced to cut corners by expediting production, resulting in higher costs and quality issues. This short-term focus causes them to overlook crucial aspects such as assembly, serviceability, and manufacturability, which later lead to major operational inefficiencies and make it difficult to sustain long-term supplier relationships. However, an even deeper challenge lies within the industry's workforce. <h2>Fluctuations in capacity and talent</h2>Unlike OEMs, NPD (New Product Development) teams at component manufacturers operate on a smaller scale with leaner teams spread across multiple projects. The surge in competition has intensified the demand for skilled talent, leading to high employee attrition. More than 2/3rds of the companies surveyed reported an average annual attrition rate of 10%-20% over the past two years. (Source: Research@Vector; Exhibit 1) Component manufacturers also often lack robust processes to ensure the traceability of part maturity, further worsening the situation. When experienced team members leave, undocumented insights about part status, test results, design decisions, and failure history leaves with them. Without traceability or a clear maturity trail, new team members are left guessing, often redoing work or overlooking critical issues. This disrupts execution and affects continuity. The eventual results include:<ul><li>Delays and rework caused by inconsistent information flow. </li><li>Short-term capacity-load mismatches, with 88% of manufacturers struggling to maintain an equilibrium between resource availability and workload. (Source: Research@Vector; Exhibit 1)  </li></ul>These challenges create a recipe for disaster, as component manufacturers struggle to keep up with OEM demands while barely finding the time to develop new products and technologies.   <h2>The domino effect of inefficiencies: How things go from bad to worse</h2>As component manufacturers juggle multiple projects with fluctuating resources, missed deadlines, quality issues, and reworks become inevitable. In fact, many OEMs station their component development engineers at supplier facilities to expedite part development and delivery, helping keep vehicle build programmes on schedule. Also, in the new paradigm, product development pipelines involve close collaboration among mechanical, hardware, and software teams.<figure class="image"><img style="aspect-ratio:16658/5116;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1771926522.png" width="16658" height="5116"></figure><figure class="image"><img style="aspect-ratio:16669/8713;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1771926619.png" width="16669" height="8713"></figure>When design changes occur in even a single aspect of a component, they trigger a cascading effect across subsystems, exponentially increasing effort, cost, and lead time through increased reworks, delays in testing and approval cycles and the wastage of resources and production capacity.As a result:<ol style="list-style-type:lower-latin;"><li>Compromised quality leads to increased costs and delays. OEMs experience high and variable production ramp-up lead times, component suppliers development team's PPAP (Production Part Approval Process) and handover to their production is also delayed.</li><li>OEMs lose confidence in local suppliers and increasingly turn to global players.</li><li>Business development efforts suffer because overloaded systems prevent manufacturers from pursuing new opportunities.</li></ol>This vicious cycle puts component manufacturers at risk of losing relevance in a rapidly evolving market. The question arises: Is there a way out of this predicament?  <h2>Leveraging Systems Thinking for sustainable growth</h2>To navigate these challenges, component manufacturers deploy various strategies, such as modular development and technical alliances for co-creation. However, these efforts have delivered only limited success because of the unpredictable nature of OEM demand.To break out of this cycle of reactive firefighting and eroding competitiveness, component manufacturers must shift from ad hoc responses to structured, system-level solutions. A Systems Thinking approach helps balance execution with innovation by regulating project inflow, managing resource elasticity, and aligning business development with execution capacity. <h5>a. Shielding development pipelines from fluctuations: Balancing capacity across new components and existing components</h5>Just as excessive water pressure can burst a pipe, overloading a development system leads to inefficiencies. Establishing clear work-sequencing rules ensures a structured intake of projects, preventing overloads while prioritising high-impact work. A 'thermostat-like' mechanism can regulate workload inflow, ensuring seamless project execution without overwhelming the system. At the same time, this mechanism must ensure adequate focus on projects related to EVs or other alternative fuel technologies that currently lack customer demand. This enables manufacturers to develop these new components and incorporate them into their portfolios in a timely manner, thereby minimising the risks they face.<figure class="image"><img style="aspect-ratio:16669/7880;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1771926770.png" width="16669" height="7880"></figure><h5>b. Building anti-fragility: Withstanding overload stresses to build resilience</h5>Anti-fragility refers to a system's ability not only to withstand shocks but also to benefit from them. The current unpredictability of workloads makes it difficult for manufacturers to manage demand fluctuations. When the system of work sequencing and project inflow is regulated, the load profile across different teams becomes visible. Using this, predictive analytics and real-time load tracking can be obtained. By implementing/deploying a 'load gradient chart', manufacturers can:<ul><li>Identify underutilised teams and allocate projects accordingly. </li><li>Mitigate short-term workload fluctuations by deploying temporary resources or outsourcing work.  </li></ul><h5>c. Opportunity flow management: Balancing load and capacity</h5>Many manufacturers take on excessive business opportunities out of fear of missing out. However, this overloads the system beyond its capacity, jeopardising both existing and new projects. A more strategic approach to 'opportunity flow management' aligns business development with execution capacity.<ul><li>Marketing teams can prioritise opportunities based on available execution bandwidth.</li><li>Persistent overload in specific teams signals the need for capacity augmentation. </li><li>A dynamic feedback system helps optimise resource allocation and improve scalability.</li></ul>While all these measures can significantly improve the flow of development at the supplier end, the benefits of such an improved flow must also extend to Tier-2 vendors. This can be achieved by providing Tier-2 suppliers with greater visibility into upcoming work so that they can be prepare well in advance by making the necessary investments, and responding quickly to the evolving needs of component manufacturers.<figure class="image"><img style="aspect-ratio:16669/6126;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1771926873.png" width="16669" height="6126"></figure>  <h2>Conclusion: The road ahead</h2>The Indian auto component industry stands at a defining moment. As the automotive landscape rapidly shifts towards alternative-fuel technologies, component manufacturers must strike a balance between sustaining their existing businesses and investing in future-ready capabilities. By shielding development pipelines, leveraging predictive analytics to build anti-fragility, and implementing opportunity flow management, manufacturers can enhance resilience and adaptability. The future will favour those who embrace structured innovation without compromising execution excellence. The challenge is immense, but so is the opportunity. India's auto component sector has the potential to emerge as a global leader if it adopts a systematic, forward-thinking approach.

Key Takeaways

India’s auto component industry is under pressure as suppliers juggle sustaining their ICE portfolios while rapidly preparing for EV and alternative-fuel technologies. This often results in delays, rework, and a weakening of supplier ecosystems. A Systems Thinking approach - balancing project inflow, managing workload effectively, and aligning opportunities with capacity - helps restore stability and focus.

Navigating the auto component crossroads - Balancing reinvention and resilience

<h2>Introduction</h2>India's auto component industry, a crucial pillar of India's $70 billion automotive ecosystem, now stands at a technological crossroads. As the future of automotive fuels remains uncertain, OEMs (Original Equipment Manufacturers) are rapidly diversifying into electric vehicles (EVs), hydrogen, biofuels, and hybrid technologies. Alongside this shift, innovations such as connected and autonomous vehicles are further expanding the scope of transformation. However, the true enablers of this transition are the component suppliers, whose role in navigating this changing landscape is indispensable. For component manufacturers, survival itself has become a challenge. A study by iFOREST(4) estimates that 45%-84% of ICE auto parts could become obsolete as India accelerates EV adoption. The challenge now is this: How can component manufacturers ride the tide of change while not completely walking away from ICE parts?<figure class="image"><img style="aspect-ratio:16660/8675;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1771925172.png" width="16660" height="8675"></figure> While the burden of developing new products and technologies for new energy sources is undeniable, the impact is not the same for all component manufacturers. Depending on their core competencies, these manufacturers are adopting different strategies to ensure business sustainability. Broadly, they fall into three categories:<figure class="image"><img style="aspect-ratio:16660/8065;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1771925303.png" width="16660" height="8065"></figure> While manufacturers that belong to Type-3 can continue their current operations with improvements, those in Types 1 and 2 face an existential challenge.<figure class="image"><img style="aspect-ratio:16660/8619;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1771925803.png" width="16660" height="8619"></figure>It is clear that a significant number of Indian auto component manufacturers recognise the urgent need to shift towards alternative fuel-based vehicles. The component manufacturers in Types 1 and 2 have to completely reinvent their portfolios in line with changing market demands. They have to be agile in developing products they have never manufactured before, as per the requirements of the OEMs. In many cases, they must have Proof of Concepts (POCs) and samples of these new components ready before approaching prospective customers.However, working on future market trends while simultaneously managing the development of the existing product portfolio is an uphill battle. The complexities are highlighted in the next section. <h2>Friction in focus: The conflict of commitments</h2><figure class="image"><img style="aspect-ratio:16655/7972;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1771925916.png" width="16655" height="7972"></figure>For most Type-1 suppliers looking to diversify into EV-related components, current customer demand for such parts is virtually non-existent. These suppliers must proactively approach customers with ready-made offerings or samples to demonstrate their capabilities; otherwise, they will not even be considered during the RFQ process. At the same time, they must continue developing their existing portfolio to meet ongoing OEM demand. As a result, they often find themselves spread too thin. From time to time, new products with no existing demand take a backseat to the urgent development needs of the existing portfolio, which come with clear customer due dates.<figure class="image"><img style="aspect-ratio:16669/8878;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1771926185.png" width="16669" height="8878"></figure> <figure class="image"><img style="aspect-ratio:1998/1046;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//6-artboard-8-copy-4-2_1771926252.jpg" width="1998" height="1046"></figure>This operational tension marks only the beginning of a deeper set of systemic issues. <h2>Racing against time: Dependency on Tier-2 vendors</h2>The rise of EV start-ups and tech-driven new-age players has disrupted the traditional automotive market, forcing legacy OEMs to accelerate EV production to maintain their market share. This pressure trickles down to component manufacturers (Tier 1-suppliers), who must match the pace through stringent timelines, accelerated testing, and concurrent engineering alongside OEMs.OEMs expect component manufacturers to adhere to agreed APQP (Advanced Product Quality Planning) timelines despite delays in receiving critical inputs from OEMs at each stage/phase of the component development process. <figure class="image"><img style="aspect-ratio:16669/8688;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1771926359.png" width="16669" height="8688"></figure>The hardest hit are the Tier-2 vendors, primarily SMEs (Small and Medium Enterprises), which constitute 97% of the Indian auto component sector. These firms often lack the financial and technical capacity to adapt quickly to EV-compatible components, making them highly vulnerable to industry shifts. The pressure from Tier-1 component manufacturers eventually trickles down to these Tier-2 vendors, who find themselves struggling to keep pace with the evolving requirements of their customers. When the receipt of child parts from downstream suppliers (Tier-2 vendors) is delayed, Tier-1 suppliers are forced to cut corners by expediting production, resulting in higher costs and quality issues. This short-term focus causes them to overlook crucial aspects such as assembly, serviceability, and manufacturability, which later lead to major operational inefficiencies and make it difficult to sustain long-term supplier relationships. However, an even deeper challenge lies within the industry's workforce. <h2>Fluctuations in capacity and talent</h2>Unlike OEMs, NPD (New Product Development) teams at component manufacturers operate on a smaller scale with leaner teams spread across multiple projects. The surge in competition has intensified the demand for skilled talent, leading to high employee attrition. More than 2/3rds of the companies surveyed reported an average annual attrition rate of 10%-20% over the past two years. (Source: Research@Vector; Exhibit 1) Component manufacturers also often lack robust processes to ensure the traceability of part maturity, further worsening the situation. When experienced team members leave, undocumented insights about part status, test results, design decisions, and failure history leaves with them. Without traceability or a clear maturity trail, new team members are left guessing, often redoing work or overlooking critical issues. This disrupts execution and affects continuity. The eventual results include:<ul><li>Delays and rework caused by inconsistent information flow.  </li><li>Short-term capacity-load mismatches, with 88% of manufacturers struggling to maintain an equilibrium between resource availability and workload. (Source: Research@Vector; Exhibit 1)  </li></ul>These challenges create a recipe for disaster, as component manufacturers struggle to keep up with OEM demands while barely finding the time to develop new products and technologies.   <h2>The domino effect of inefficiencies: How things go from bad to worse</h2>As component manufacturers juggle multiple projects with fluctuating resources, missed deadlines, quality issues, and reworks become inevitable. In fact, many OEMs station their component development engineers at supplier facilities to expedite part development and delivery, helping keep vehicle build programmes on schedule. Also, in the new paradigm, product development pipelines involve close collaboration among mechanical, hardware, and software teams.<figure class="image"><img style="aspect-ratio:16658/5116;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1771926522.png" width="16658" height="5116"></figure><figure class="image"><img style="aspect-ratio:16669/8713;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1771926619.png" width="16669" height="8713"></figure>When design changes occur in even a single aspect of a component, they trigger a cascading effect across subsystems, exponentially increasing effort, cost, and lead time through increased reworks, delays in testing and approval cycles and the wastage of resources and production capacity.As a result:<ol style="list-style-type:lower-latin;"><li>Compromised quality leads to increased costs and delays. OEMs experience high and variable production ramp-up lead times, component suppliers development team's PPAP (Production Part Approval Process) and handover to their production is also delayed.</li><li>OEMs lose confidence in local suppliers and increasingly turn to global players.</li><li>Business development efforts suffer because overloaded systems prevent manufacturers from pursuing new opportunities.</li></ol>This vicious cycle puts component manufacturers at risk of losing relevance in a rapidly evolving market. The question arises: Is there a way out of this predicament?  <h2>Leveraging Systems Thinking for sustainable growth</h2>To navigate these challenges, component manufacturers deploy various strategies, such as modular development and technical alliances for co-creation. However, these efforts have delivered only limited success because of the unpredictable nature of OEM demand.To break out of this cycle of reactive firefighting and eroding competitiveness, component manufacturers must shift from ad hoc responses to structured, system-level solutions. A Systems Thinking approach helps balance execution with innovation by regulating project inflow, managing resource elasticity, and aligning business development with execution capacity. <h5>a. Shielding development pipelines from fluctuations: Balancing capacity across new components and existing components</h5>Just as excessive water pressure can burst a pipe, overloading a development system leads to inefficiencies. Establishing clear work-sequencing rules ensures a structured intake of projects, preventing overloads while prioritising high-impact work. A 'thermostat-like' mechanism can regulate workload inflow, ensuring seamless project execution without overwhelming the system. At the same time, this mechanism must ensure adequate focus on projects related to EVs or other alternative fuel technologies that currently lack customer demand. This enables manufacturers to develop these new components and incorporate them into their portfolios in a timely manner, thereby minimising the risks they face.<figure class="image"><img style="aspect-ratio:16669/7880;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1771926770.png" width="16669" height="7880"></figure><h5> b. Building anti-fragility: Withstanding overload stresses to build resilience</h5>Anti-fragility refers to a system's ability not only to withstand shocks but also to benefit from them. The current unpredictability of workloads makes it difficult for manufacturers to manage demand fluctuations. When the system of work sequencing and project inflow is regulated, the load profile across different teams becomes visible. Using this, predictive analytics and real-time load tracking can be obtained. By implementing/deploying a 'load gradient chart', manufacturers can:<ul><li>Identify underutilised teams and allocate projects accordingly.  </li><li>Mitigate short-term workload fluctuations by deploying temporary resources or outsourcing work.  </li></ul><h5>c. Opportunity flow management: Balancing load and capacity</h5>Many manufacturers take on excessive business opportunities out of fear of missing out. However, this overloads the system beyond its capacity, jeopardising both existing and new projects. A more strategic approach to 'opportunity flow management' aligns business development with execution capacity.<ul><li>Marketing teams can prioritise opportunities based on available execution bandwidth.</li><li>Persistent overload in specific teams signals the need for capacity augmentation.  </li><li>A dynamic feedback system helps optimise resource allocation and improve scalability.</li></ul>While all these measures can significantly improve the flow of development at the supplier end, the benefits of such an improved flow must also extend to Tier-2 vendors. This can be achieved by providing Tier-2 suppliers with greater visibility into upcoming work so that they can be prepare well in advance by making the necessary investments, and responding quickly to the evolving needs of component manufacturers.  <figure class="image"><img style="aspect-ratio:16669/6126;" src="https://web-assets.vectorconsulting.in/storage/editor_uploads//image_1771926873.png" width="16669" height="6126"></figure>  <h2>Conclusion: The road ahead</h2>The Indian auto component industry stands at a defining moment. As the automotive landscape rapidly shifts towards alternative-fuel technologies, component manufacturers must strike a balance between sustaining their existing businesses and investing in future-ready capabilities. By shielding development pipelines, leveraging predictive analytics to build anti-fragility, and implementing opportunity flow management, manufacturers can enhance resilience and adaptability. The future will favour those who embrace structured innovation without compromising execution excellence. The challenge is immense, but so is the opportunity. India's auto component sector has the potential to emerge as a global leader if it adopts a systematic, forward-thinking approach.

Navigating the auto component crossroads: Balancing reinvention and resilience

Navigating the auto component crossroads: Balancing reinvention and resilience

Download PDF

Discover how Indian auto component suppliers can balance ICE portfolios with EV innovation using Systems Thinking to eliminate NPD delays and rework.