Auto part suppliers may take a detour from US market under two-tier tariff

The tariff imposed by the Donald Trump administration is expected to wipe out the Indian industry's $6.6 billion export market to the US

With a two-tier tariff of 25 per cent and 50 per cent looming over the automotive (auto) components industry, Indian players are turning to new markets such as the European Union and doubling down on future-ready products.

 

The duties, imposed by the Donald Trump administration, threaten to wipe out the industry’s $6.6 billion export market to the US. The setback is severe: the US accounted for nearly 27 per cent of India’s $22.9 billion auto component exports in 2024-25.

 

Ajinkya Firodia, vice-chairman and managing director of Kinetic Engineering, acknowledged the near-term hit but underlined the need for diversification. “To mitigate the impact of high US tariffs, we will look at alternative markets, primarily in Europe, where requirements are similar and exports are manageable. At the same time, we are focusing on strengthening our domestic business and diversifying into future-ready products such as electric vehicle (EV) components,” he said.

   

Industry estimates suggest $3.58 billion worth of exports to the US — about 55 per cent — will continue to face a 25 per cent duty, while the remaining $3.08 billion, or 45 per cent, will now attract a sharply higher 50 per cent levy. 

 

Firodia added that competition from China and South Korea, which continue to dominate on costs, is another immediate challenge. “We must stay cost-competitive, even as the US takes time to build its own manufacturing ecosystem. We are also engaging closely with American customers to assure them of cost-cutting and value-engineering measures, whether through better packaging, reduced logistics costs, or technical efficiencies to soften the effect of tariffs. Over the longer term, we will even evaluate setting up operations in the US to sustain partnerships with our customers.”

 

Pratik Kamdar, cofounder and chief executive officer of Neuron Energy, warned that the tariff shock could ripple through the global EV supply chain. “For EV battery players like us, this move could strain existing supply relationships with manufacturers, increase cost pressures, and potentially slow the momentum of EV adoption worldwide. We urge the Indian government to diversify export markets and accelerate domestic manufacturing investments. Strengthening India’s position as a reliable alternative supply base is now more critical than ever.”

 

The Automotive Component Manufacturers Association of India, the apex industry body, said the measures pose short-term challenges but also an opportunity to enhance competitiveness and diversify. “It is important to increase domestic value addition and broaden export markets. We remain engaged with the Government of India and industry stakeholders to strengthen the sector’s resilience and long-term growth prospects,” it said in a statement.

 

While exporters remain wary of disruptions, the industry consensus is clear: India must pivot to new markets, deepen its domestic value chain, and invest aggressively in future technologies such as EV components and clean-tech solutions.