India-US trade deal to boost auto suppliers, says Nomura; lists top winners

Nomura said the combination of lower duties and a weaker Indian rupee increases global competitiveness for auto suppliers such as Bharat Forge, Sansera, Sonacoms, Belrise Industries, and Motherson

Nomura on India Autos: The India-US trade deal is set to benefit Indian auto part exporters by providing preferential tariff treatment and boosting global competitiveness, according to analysts at Nomura. Following the deal, India will receive a specific tariff rate quota for automotive parts exports to the United States of America (USA), allowing nearly half of these shipments to enter at zero duty.  

Earlier, these products faced tariffs of around 25 per cent under Section 232. The agreement also extends to aircraft and aircraft components.  

Nomura highlighted that aerospace companies Boeing and Airbus currently source around $1.25 to $1.5 billion worth of aerospace components from India, which could increase substantially after the trade deal.  

The US will also get zero-duty access to motorcycles with engine capacities above 800cc, benefiting firms like Harley-Davidson. Additionally, luxury petrol and diesel cars are expected to face reduced duties of around 30 per cent over time. Electric vehicles (EVs) imported from the US are not covered under the tariff concessions.

Nomura view on India Autos after India-US trade deal

According to analysts at Nomura, the combination of lower duties and a weaker Indian rupee increases global competitiveness for auto suppliers such as Bharat Forge, Sansera, Sonacoms, Belrise Industries, and Motherson. Indian rupee has depreciated around 9.2 per cent against the US dollar over the past year. 

The brokerage further noted that US imports of auto parts from India stood around $2 billion in 2023, representing only 2 per cent of total US auto parts imports and behind other major exporters such as Mexico, Canada, China, Japan, Germany and Korea. It expects the new tariff structure to strengthen the position of Indian auto suppliers in global markets and support new business wins.  

For tractor exports, Mahindra & Mahindra (M&M) is expected to see US tariffs drop from 50 per cent to 18 per cent. Higher aerospace sourcing is expected to benefit Sansera Engineering and Samvardhana Motherson, which have already scaled up their EU operations.  

However, Nomuma does not expect a significant impact from lower tariffs on motorcycles above 800cc due to the segment’s small size. Overall, trade improvements are likely to support commercial vehicle freight demand.  

The brokerage maintained 'Buy' ratings on Ashok Leyland and Tata Motors CV, citing a continuing upcycle in the commercial vehicle sector. 

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