Trump auto tariffs will hit India but it won't be a 'tsunami': Here's why

Industry observers say the tariff impact on Indian auto sector would be minimal, though some impact could be seen on auto component industry

US President Donald Trump’s announcement of 25 per cent tariffs on auto imports hit the stock prices of major automakers worldwide on Thursday. Indian auto stocks also felt the heat, with Tata Motors tumbling over 6 per cent in early trade.

 

Industry observers say the tariff impact on the Indian auto sector would be minimal, though some impact could be seen on the auto component industry.

 

How Indian auto stocks were impacted by Trump tariffs

 

Among major players, Tata Motors, which exports a significant chunk of JLR cars to the US, tanked 6.58 per cent to Rs 661.35 on the BSE. Ashok Leyland dropped 4.60 per cent, Mahindra & Mahindra dipped 1.70 per cent, Bajaj Auto slipped 1.48 per cent, and Apollo Tyres skidded 1.41 per cent.

   

The impact was more significant on auto components and equipment firms. Sona Comstar, a key supplier to Tesla, saw its shares drop over 4 per cent. Samvardhana Motherson, India’s largest auto parts supplier, declined by more than 2 per cent, while Bharat Forge, another Tesla supplier, decreased by 0.4 per cent.

 

 

India-US automotive trade volume

 

According to Automotive Component Manufacturers Association of India’s (ACMAs) annual industry performance report, India’s auto components exports grew by 5.5 per cent, reaching $21.2 billion, while imports grew by 3 per cent, reaching $20.9 billion.

 

The US was the top export destination for Indian auto components, accounting for 27 per cent of total exports, the report states. The total exports to North America (primarily the US) were $6.79 billion, showing 4.5 per cent growth compared to the previous year.

 

However, India remains a minor player in US auto imports. In FY24, India accounted for just 3 per cent of the $97 billion worth of auto components imported by the US from outside North America, according to Japanese firm Nomura.

 

In contrast, countries such as Mexico (22.8 per cent), Japan (18.6 per cent), South Korea (17.3 per cent), and Canada (12.9 per cent) were among the US' major auto import partners.

 

What industry experts say

  JATO Dynamics India President and Director Ravi G Bhatia believes Trump’s tariffs apply broadly, not targeting India specifically. “This step will have an impact, but it’s not a ‘tsunami’. Indian suppliers will find ways to retain their market share in the US,” he told news agency PTI, cautioning that it’s too early to draw firm conclusions.

 

Bhatia mentioned that India’s low-cost manufacturing could become a key advantage, as higher tariffs will push up vehicle prices in the US. However, he suggested that some Indian automakers eyeing expansion into the US, particularly in electric vehicles, might rethink their strategies.

 

Ajay Srivastava, founder of Global Trade Research Initiative (GTRI), pointed out that India’s passenger car exports to the US were only $8.9 million in 2024—just 0.13 per cent of its total car exports of $6.98 billion. This negligible exposure means the tariffs will have little effect on India’s car export business.

 

Since the 25 per cent tariffs apply to all exporting countries, Indian auto component manufacturers could even benefit. “With India’s competitive advantage in labour-intensive manufacturing and relatively low import tariffs (ranging from zero to 7.5 per cent), the country could increase its US market share over time,” Srivastava said. Instead of retaliating, he advised, India should view the tariffs as a neutral or even mildly beneficial development in the long run.

 

[With inputs from agencies]