India's auto component suppliers sitting on inventory worth ₹98,000cr
What's the story
India's automotive component industry is sitting on a whopping ₹98,000 crore worth of inventory. This is according to a report by Vector Consulting Group. The report also highlights that better inventory management could free up between ₹29,000-39,000 crore of this capital. The potential release includes around ₹4,000-5,600 crore from the MSME ecosystem, which makes up nearly 80% of all auto component manufacturers in India.
Inventory reduction
Potential gains from improved inventory management
The Vector Consulting Group's white paper, "The Broken Flywheel: Building a Future-Ready Automotive Supply Ecosystem," says firms using consumption-based replenishment strategies can cut their inventory by 30-40%.
The estimate is based on the consulting firm's experience with implementation.
The study surveyed 21 senior industry executives between July and August 2026 to arrive at this conclusion.
Turnover boost
Incremental turnover potential from productivity improvements
The study also estimates that India's automotive component MSMEs generate a turnover of about ₹2.4-2.9 lakh crore.
If productivity improves by 30% across this sector, it could lead to an additional annual turnover of ₹74,000-88,000 crore.
After accounting for material costs, this improvement could create an illustrative incremental value pool of ₹29,000-44,000 crore.
Investment cycle
Creating a self-reinforcing investment cycle
The report suggests that these gains could create a self-reinforcing investment cycle.
This would involve operational improvements freeing up working capital, higher productivity generating a recurring surplus, and stronger supplier economics improving access to external capital.
The resulting surplus could then be invested in technology, engineering, product development, among other advanced capabilities needed for higher-value segments of the automotive industry.