Indian auto component OEMs are reeling from the shock of the newly announced 25% tariff by the USA, which comes on top of existing duties. While these tariffs also apply to most vehicle imports into the US, their impact on Indian vehicle OEMs may be limited, as exports to the American market are minimal. However, for component manufacturers, the situation is far more challenging, as nearly a third of the industry’s total revenue comes from exports.
A veteran from the auto component industry sought to strike an optimistic tone, noting that the uniform 25% tariff would maintain a level playing field for all exporters to the US. As a result, Indian component makers are unlikely to face a surge in competitive pressure compared to counterparts from China or Mexico.
“The US President’s order does not specify tariff lines, making it difficult for India’s auto component OEMs to gauge the full impact on exports. However, one thing is clear—affected tariff lines will see duties jump from 0 to 25%, which will have a significant impact,” said an industry expert. “The positive takeaway is that these tariffs are not India-specific. Since all exporting countries will face the same levy, the new order is unlikely to heighten competitive pressures.”
The expert was responding to the latest tariff hike on imported automobiles and select auto parts, imposed in addition to existing duties. While the new levy on cars takes effect from April 3, auto components will face the hike by May 3 at the latest. Though the industry is hesitant to comment on the full ramifications just yet, many are searching for silver linings. Nevertheless, the sudden and substantial duty increase presents a major challenge for several large component manufacturers.
Nearly a third of India’s auto component exports are destined for North America, primarily the US. Based on available information, the new tariffs will apply to engines, transmissions, powertrain components, key electrical parts, and all categories of imported vehicles.
Greater clarity on the impact of the new tariff regime on Indian OEMs is expected once the Federal Register in the US publishes the full list of affected parts and vehicles under “Annexure 1.”
According to the order signed by US President Donald Trump, “Except as otherwise provided in this proclamation, all imports of articles specified in Annex I to this proclamation or in any subsequent annex, as set out in a later notice in the Federal Register, shall be subject to a 25% tariff on goods entered for consumption or withdrawn from warehouse for consumption. This will take effect from 12:01 a.m. Eastern Daylight Time on April 3, 2025, for automobiles, and on the date specified in the Federal Register for automobile parts, but no later than May 3, 2025. These tariffs will remain in effect unless expressly reduced, modified, or terminated.”
The order further states that the above ad valorem tariff will be levied in addition to any existing duties, fees, or other charges applicable to imported automobiles and certain auto parts.
Dependence on the US Market: India exported $6.79 billion worth of auto components to North America last fiscal, making the US a crucial market for Indian OEMs. Nearly a third of India’s total component exports, valued at $21.2 billion, were destined for this region. However, from the US perspective, imports from India account for only about 3% of its total auto component imports, with Mexico, Canada, and China remaining the key suppliers.
A more significant impact could arise if the US were to impose differential tariff rates on different countries. “There will be a problem if selective relaxations are granted, or if US automotive demand slumps due to the new tariffs. Additionally, if China, for instance, decides to undercut other exporters through opaque tariff strategies, it could disrupt the competitive landscape. So, there are still many uncertainties,” said the industry expert.
The tariffs are expected to drive up vehicle prices in the US, as at least half of the vehicles sold domestically are imported. Moreover, around 60% of the components used in US vehicles come from imports. Meanwhile, India imports $1.4 billion worth of auto components from the US, currently subject to a 15% import duty.
Limited Impact on Vehicle Exports: According to the United Nations COMTRADE database, India exported motor cars and vehicles worth just $37.11 million to the US in 2023. Given this modest share, the direct impact of US tariff hikes on Indian automakers is expected to be minimal, said Naveen KR, Smallcase Manager and Senior Director at Windmill Capital.
India exported approximately 6.7 lakh vehicles in 2024, with exports now contributing 15–16% of total domestic automotive sales. Automakers such as Maruti Suzuki and Kia Motors are increasingly leveraging exports as a key growth strategy. “While Indian vehicle exports were previously concentrated in Africa, Latin America, and South Asia, they are now making inroads into developed markets like Japan, underscoring their growing global competitiveness. However, when it comes to the United States, export exposure remains relatively limited,” he added.
