US tariffs to hit 8% of India's auto component output: Icra report

High US tariffs are expected to affect close to 8 per cent of India's overall auto component production, ratings firm Icra said on Wednesday.

Indian auto component exporters are at a relative disadvantage compared to most other Asian exporting nations, highlighting the importance of concluding an India-US bilateral trade agreement, it added.

Auto component exports contribute nearly 30 per cent to the industry's revenues, with the US alone accounting for 27 per cent of this share.

"As a result, close to 8 per cent of India's overall auto component production is expected to be directly affected by the recently announced tariffs," Icra stated.

The imposition of a 50 per cent tariff on Indian goods places Indian auto component exporters at a disadvantage compared to their Asian counterparts, as countries such as China, Japan, Vietnam, and Indonesia face lower tariffs of 1530 per cent, it pointed out.

Further, manufacturers in Mexico and Canada remain exempt under the United States-Mexico-Canada Agreement (USMCA), further intensifying competitive pressures on Indian exporters, it added.

Exports of auto components from India to the US have been rising steadily, moving from USD 4.1 billion in FY2021 to USD 6 billion in FY2022, USD 6.5 billion in FY2023, USD 6.8 billion in FY2024, and are estimated to reach USD 7.3 billion in FY2025.

Geography-wise, exports comprise 29 per cent of the country's auto component industry, with domestic sales accounting for 56 per cent and replacement demand for 15 per cent, Icra said.

Within exports, Europe accounts for 30 per cent, the US 27 per cent, Asia 26 per cent, Latin America 3 per cent, and other regions 13 per cent, it added.