Grammar - What is wrong with the following sentence? and why?

you would have to say IN which for your sentence to make sense with which. The reason it's where is because you are talking about the parts being IN the car, which is a place

edit @shadi - component parts is a term, it's not incorrect.

You can use both Where and Which with a few modifications

1) Using "component parts" is redundant because they sort of mean the same thing.

2) Even though the word "where" often refers to a location, it can also refer to an arrangement or a situation Eg, I have a job where i don't have to work hard. (Job is not a location but a situation)

3)When you say "each of those parts have its own functionality" Each means one and so it should be rephrased as "each of those parts HAS its own functionality"

So....

A) The car consists of many different components where each component has its own functionality.

B) The car consists of many different parts in which each of those parts has its own functionality.

the car consists of many different component parts that each have its own functionality.

i didnt really do much apart from removing some extra words. also, if you're going to use which, you need a comma after parts, that's just the rule. and you're totally right about the where and the which, there was some rule in the sats that i cant remember lol.

A car consists of many different components,each of those has a special function.

you must use components or parts,as they mean same thing, one is enough and you should add 'S' to the part or component, because of 'MANY'.

when we use each, the verb must be singular, so HAVE is wrong, we must use HAS.