US auto firms hesitant to acquire parts from Indian manufacturers

US automakers are hesitant to sign new supply contracts with Indian auto component makers due to higher tariffs, though existing trade may continue in the near term, ACMA said

Automakers in the US and its neighbouring countries are showing hesitation in discussions on import supply contracts with Indian auto component manufacturers for new projects due to recent high tariffs imposed by President Donald Trump’s administration, the Automotive Component Manufacturers Association of India (ACMA) said on Wednesday.

 

The Association said exports from India to the US remained flat year-on-year (Y-o-Y) at around $3.64 billion in the first half of 2025-26 (H1FY26), adding that the impact of tariffs is expected to become evident from H2FY26.

 

The US, which is Indian auto component industry's largest export market, imposed a 25 per cent tariff on India last year.

 

Addressing a press conference, ACMA President-designate Sriram Viji said higher tariffs imposed by the US on several countries, including India, have created uncertainty among buyers.

 

"…the tariffs imposed by the US on much of the world and India have led to a lot of hesitation from companies in the US and the Nafta (North American Free Trade Agreement) region to source components for their new projects from firms in India," he added.

 

Viji, who is also the managing director (MD) of Brakes India, noted that while existing components trade with the US may continue in the near term, the bigger concern lies in future orders.

 

"While the immediate auto components trade may not take a hit, you will see hesitation in people awarding businesses that are a year, or two years, or three years down the line. This is a big cause of concern for many people in the industry," he noted.

 

Viji added that India faces a disadvantage as some countries have secured more favourable tariff terms under US trade rules. "Some countries have negotiated new beneficial tariff rates under Section 232 (the US Trade Expansion Act of 1962). India does have a disadvantage in that context, competing with some other countries out there," he said.

 

Section 232 is a clause in the Act that permits the US President to impose tariffs or trade restrictions on imports on national security grounds.

 

According to Viji, even small differences in import duties can materially affect sourcing decisions. "Even a 10 per cent tariff rate difference between countries will make a significant shift in trade because margins are relatively thin and absorbing those kinds of price differences is very hard for (Indian) companies... Unless we see either some resolution on this front, or at least stability or clarity on where things are going, I think there would be some challenges going forward with respect to trade, especially with the US," he mentioned.

 

Vikrampati Singhania, MD of JK Fenner (India) and president of ACMA, said uncertainty with the US over tariff issues has already begun to affect fresh orders.

 

"New contracts, which are due, are in a little bit of limbo while the existing supply chain is continuing right now... A supplier has to go through a stringent qualification process before starting supplying components to an automaker. This is why it is not easy to immediately switch suppliers," he noted.

 

"To some extent, the rupee depreciation against the dollar has helped cushion the impact of US tariff a little bit," he mentioned.

 

Indian auto component industry's overall exports in H1FY26 stood at $12.2 billion, recording a growth of 9.3 per cent Y-o-Y, according to ACMA. After the US, Germany, Thailand, Brazil and the UAE are the top export markets for the industry.

 

The industry's imports, meanwhile, grew at a faster rate than its exports. In H1FY26, its imports stood at $12.3 billion, recording a 12.5 per cent Y-o-Y growth. China, Japan, Germany, South Korea, and the US are the top five import markets for the Indian auto-parts industry. The Indian auto-parts industry's overall revenue in H1FY26 stood at $41.2 billion, recording a 6.8 per cent growth Y-o-Y.