Auto part makers may lose Rs 4.5K crore due to trade tariffs: Icra

Leading auto component manufacturers could take a revenue hit of up to Rs 4,500 crore in the current fiscal due to dip in overseas shipments stemming from the tariff-related impact, ratings firm Icra said on Monday.

Icra expects the revenue growth of Indian auto component industry, represented by sample of 46 auto ancillaries with aggregate annual revenues of over Rs 3 lakh crore in FY2024, to ease to 6-8 per cent in FY2026, against 8-10 per cent projected earlier, if there is mid-to-high single-digit revenue decline in exports to the US, stemming from the tariff-related impact, it said in a statement. 

The steep increase in import tariffs imposed recently by the US is estimated to burden the entire supply chain with an incremental cost of around Rs 9,000 crore, which will need to be borne by the US consumers, US importers, and Indian exporters, it said.

The extent to which the Indian auto component exporters share the cost burden will be contingent on their competitiveness and the price elasticity of the products exported. 

"While the auto component suppliers with whom Icra has interacted indicate that most of the incremental costs would be passed on, however, as in any buyer-supplier negotiation, the extent of pass-through would depend on the supplier's criticality, share of business, competition, and technological intensity of the components supplied," Icra Senior Vice President and Head - Corporate Ratings Group Shamsher Dewan said.

If, on average, 30-50 per cent of the incremental tariff costs are to be absorbed by the Indian auto component exporters, Icra estimates an earnings impact of roughly Rs 2,700-4,500 crore, which is 3-6 per cent of the auto component industry's operating profits and 10-15 per cent of the auto component exporters' operating profits, he added. 

The Indian auto component industry demand continues to benefit from a diversified mix of end-user segments and geographies, with over 70 per cent of its revenues coming from domestic sales.

The US constituted only close to 8 per cent of the overall industry revenues in FY2024.

Export of auto components to the US grew at a compound annual growth rate (CAGR) of 15 per cent during FY2020-2024, Icra noted.

The US government imposed a 25 per cent tariff on imported key automobile parts (engine, transmission, powertrain, and electrical components) vide an order dated March 26, 2025, effective May 3, 2025.

About 65 per cent of India's auto component export basket is estimated to fall under the 25 per cent import tariff category.

Prior to this, a 25 per cent tariff was imposed on import of steel and aluminium content in auto parts. 

Subsequent to the order dated March 26, 2025, a reciprocal tariff of 26 per cent was imposed on exports from India to the US, on which there is a temporary pause for 90 days, but with a 10 per cent ad valorem duty still applicable.

Products that fall under the US-Mexico-Canada Arrangement (USMCA) are exempted at present.