New US tariffs may pose a challenge for India’s auto component exports

India’s auto component industry may face near-term headwinds as U.S. President Donald Trump has announced a 25% uniform tariff on automotive imports. The move is expected to increase costs for Indian powertrain, engine component, and transmission system manufacturers, which together account for a significant portion of India’s $6.79 billion exports to the U.S. in FY24.

Industry sources told Business Today that while Indian auto parts have historically held a price advantage over Chinese and European suppliers, this new duty could dampen demand from American automakers. 

A recent cost analysis by ACMA and BCG showed that Indian components were already 20-25% cheaper than Chinese parts in the U.S. market, owing to tariffs on China. Additionally, in Germany, where Eastern European suppliers dominate, Indian products were found to be up to 15% cheaper due to lower labor and energy costs.

While the impact on overall exports may not be immediate, concerns remain over potential tariff exemptions for select countries like Mexico and China, which could create an uneven playing field for Indian manufacturers. Moreover, there is a growing risk of China using opaque subsidies to undercut global pricing, though Washington is expected to closely monitor such practices.

Sources add that despite these challenges, the Indian auto component industry, which exported $21.2 billion globally in FY24, remains well-diversified and resilient. Manufacturers may explore cost efficiencies, alternative supply chain strategies, or even expanding production in key global markets to mitigate the impact.

Meanwhile, the Indian government is closely monitoring trade developments and is expected to push for fairer market access in upcoming trade discussions with the U.S.