US tariff cut likely to benefit Indian auto component makers more than OEMs

Brokerages and industry bodies say easing US reciprocal tariffs to 18% will materially boost competitiveness and exports of Indian auto component makers, while gains for vehicle OEMs remain limited

Indian auto component manufacturers are likely to emerge as one of the biggest beneficiaries of the proposed reduction in US reciprocal tariffs on Indian goods to 18 per cent, with the easing of duties expected to materially improve cost competitiveness and export traction for ancillary players far more than for automobile OEMs.

 

Brokerage and industry assessments suggest that while the headline tariff cut signals a positive shift in bilateral trade sentiment, the commercial upside is skewed decisively in favour of auto component exporters, for whom the US is a core market, rather than vehicle manufacturers that have limited direct exposure to the American market.

   

The Nifty Auto index was up 2.83 per cent around midday. Component exporters such as Bharat Forge (up 7 per cent), Samvardhana Motherson International (up 6.1 per cent) and Uno Minda (up 3.24 per cent) gained in morning trade. Among automobile OEMs, TVS Motor was up 2.2 per cent, Mahindra & Mahindra 2.5 per cent and Tata Motors’ passenger vehicle business 2.65 per cent.

 

According to Axis Direct, the US accounts for roughly 25–30 per cent of exports for auto component players, and the moderation in reciprocal tariffs represents a “meaningful tailwind” by lowering effective import costs by an estimated 6–8 per cent. This is expected to enhance bid competitiveness, support incremental volume gains and improve plant utilisation, particularly in engineered, precision and value-added components.

 

In contrast, benefits for vehicle OEMs are likely to remain modest. Indian passenger and commercial vehicle makers export only small volumes directly to the US, and any potential gains are constrained by regulatory entry barriers, homologation costs and distribution economics, analysts said.

 

Industry data underline the scale of the opportunity for component makers. The Automotive Component Manufacturers Association of India (ACMA) said the industry recorded a total turnover of $80.2 billion in FY25, with exports touching $22.9 billion and a trade surplus of about $500 million. In the first half of FY26 alone, auto component exports rose 9.3 per cent year-on-year to $12.2 billion, with the US among the top export destinations.

 

ACMA highlighted that exports to the US have been growing — from $3.5 billion in FY21 to $6.2 billion in FY25. In H1FY26, auto component exports to the US stood at $3.1 billion.

 

In contrast, India imported around $1.5 billion worth of auto components in FY25, up from $904 million in FY21. In H1FY26, India imported $844 million worth of auto components.

 

“Auto ancillary companies are positioned to capture a larger share of the benefit versus vehicle manufacturers, given higher export intensity and contractual supply arrangements with global OEMs,” Axis Direct said, adding that component suppliers are less dependent on end-market pricing actions than OEMs, allowing tariff savings to flow more directly into margins and volumes.

 

ACMA President Vikrampati Singhania described the proposed tariff reduction as a timely boost for the sector. “The proposed reduction in reciprocal tariffs to 18 per cent is a positive step that will enhance the competitiveness of Indian automotive components in the US market. At a time when global supply chains are undergoing structural realignments, this development provides greater predictability and confidence for long-term trade and investment decisions,” he said, adding that the US remains one of the most important export destinations for Indian component makers.

 

The association noted that stronger bilateral trade conditions could deepen collaboration in advanced manufacturing, electrification, electronics and clean mobility, reinforcing India’s role as a global sourcing hub.

 

However, trade experts have urged caution until greater clarity emerges on product coverage and timelines. The Global Trade Research Initiative (GTRI) pointed out that several aspects of the deal remain unclear, including whether the tariff cut applies uniformly across sectors and how it interacts with existing US duties such as Section 232 tariffs on steel, aluminium and select auto components.

 

“Until there is a joint statement, negotiated text and clarity on enforcement, this should be seen as a political signal, not a final deal,” GTRI said, noting that some auto components could still face elevated duties despite the headline reduction.

 

Even so, analysts said the direction of travel is clearly supportive for auto component exporters. While tariffs remain above long-term averages, the rollback materially eases profitability pressures, improves earnings visibility for FY27–FY28 and supports valuation comfort for US-linked auto ancillary companies. For vehicle OEMs, by contrast, the impact is expected to be incremental at best.

 

As global OEMs continue to diversify supply chains, the tariff reset strengthens India’s positioning in the US auto ecosystem — but it is the component makers, not the carmakers, who stand to gain the most.

 

Mahindra Group Chief Executive Officer and Managing Director Anish Shah said the immediate reduction in reciprocal tariffs on Indian exports, along with the commitment to progressively lower tariff and non-tariff barriers, would boost growth momentum and improve the predictability businesses need to invest with confidence.

 

TVS Motor Company Chairman Sudarshan Venu said the reduction in US reciprocal tariffs to 18 per cent would improve export competitiveness and reinforce confidence in long-term bilateral economic ties.

 

He added that the intent to progressively lower tariffs and non-tariff barriers could deepen supply-chain integration, enable faster technology collaboration and attract investment into advanced manufacturing, helping Indian industry scale, innovate and create jobs while supporting India’s ambition to emerge as a globally competitive manufacturing and innovation hub.