US tariffs raise concerns across India's automotive and component sectors

Tariff hike to 50% may hit Indian exports of tyres and auto components to the US; industry explores nearshoring, diversification, and cost efficiency measures

The White House’s decision to impose an additional 25 per cent tariff on Indian imports — raising total duties to 50 per cent — has sparked concern across India’s automotive and component sectors.

 

With the US accounting for 27 per cent of India’s auto component exports and 17 per cent of tyre exports, analysts warn the hike could sharply dent India’s price competitiveness, particularly in off-highway components and the replacement tyre segment, compared to Asian peers like Vietnam and Indonesia, who enjoy lower or preferential trade duties.

 

The broader sector is under pressure. Saurabh Agarwal, partner and automotive tax leader at EY India, noted that even though reciprocal 25 per cent tariffs from India may not hit most automotive goods, the initial US tariff already “fundamentally alters the competitive landscape” for Indian exports. He recommended that Indian firms consider nearshoring production to Mexico or Canada under the USMCA framework, while also capitalising on the new United Kingdom trade deal and pushing for a faster agreement with the European Union.

 

The Automotive Component Manufacturers Association of India (ACMA) flagged the move as a near-term challenge but also saw it as a prompt for Indian exporters to boost competitiveness and diversify markets. Shradha Suri Marwah, president of ACMA, said the tariff hike reflects the changing dynamics of global trade and, while it may create short-term challenges, it highlights the need to enhance value addition, strengthen competitiveness, and explore newer markets.

 

Today, the Nifty Auto index ended marginally higher at ₹23,808, up 0.2 per cent. Hero MotoCorp led the gains with a 4.2 per cent rise, followed by TVS Motor (up 2.1 per cent) and Bharat Forge (up 1.9 per cent). Other gainers included Balkrishna Industries, Maruti Suzuki, Bosch, and Bajaj Auto. On the flip side, MRF, Samvardhana Motherson, and Tata Motors were among the top laggards, slipping up to 1.4 per cent.

 

Industry voices were mixed on the immediate fallout. Rakesh Sharma, executive director at Bajaj Auto, said the company’s US exposure remains minimal — less than 1 per cent of its turnover — limited to KTM and Triumph motorcycles exported by partners. 

 

“The real impact will depend on how demand shifts in response to higher prices and how our competitive position evolves,” he noted, adding that developments in the US–Mexico economic corridor could indirectly affect demand in one of Bajaj’s key markets.

 

Carraro India also does not anticipate a direct impact. “Our exposure to the US is just 6–7 per cent, and our diversified global portfolio makes us resilient,” said managing director Balaji Gopalan. He added that long lead times and validation complexities in transmission systems make it difficult for OEMs to shift sourcing immediately.

 

ICRA also noted that auto component exporters, especially those with significant dependence on the US market, are likely to explore new geographies and improve cost efficiency to mitigate the impact. It also pointed out that while Indian tyre exporters earlier held a slight edge over Chinese rivals, that advantage may now erode due to preferential tariffs extended to select Southeast Asian countries.

 

Despite the trade shock, ICRA maintains a cautiously optimistic outlook, projecting modest growth across most segments in FY26, supported by festive demand, infrastructure activity, and rural income stability. However, with global trade headwinds intensifying, the auto sector’s next phase may depend on how swiftly Indian manufacturers adapt to the new normal.

 

(With inputs from Sohini Das)