US Prez Trump’s 25% auto tariffs put India’s $7 bn component exports at risk

New Delhi: US President Donald Trump’s decision to impose a 25 per cent tariff on all auto imports has raised concerns for India’s nearly $7 billion worth of exports to the United States, with industry experts warning of potential margin pressures.

Starting April 2, all automobiles and car parts entering the US will be subject to the tariff. Trump, announcing the measure on Wednesday, asserted that the move would bolster domestic manufacturing. “This will continue to spur growth. We’ll effectively be charging a 25 per cent tariff,” he told reporters.

The White House anticipates that the tariffs will generate $100 billion in annual revenue. However, as US automakers also rely on global supply chains, the new tax could complicate production costs and sales strategies. Trump, however, dismissed these concerns, stating, “This is permanent.” 

While India does not export a significant volume of cars to the US, Tata Motors’ luxury subsidiary, Jaguar Land Rover (JLR), has a strong presence in the American market. Approximately 23 per cent of JLR’s over 400,000 units sold in FY24 were in the US, all sourced from its UK manufacturing plants. Analysts warn that JLR’s profitability could take a hit if the additional cost burden is transferred to consumers, potentially affecting market share.

“The options available are passing the cost onto consumers, cutting expenses, or absorbing the impact,” an industry expert said. Another alternative would be setting up a manufacturing facility in the US to circumvent the tariff.

Indian auto component exporters are expected to bear the brunt of the tariff hike. Companies such as Sona BLW Precision Forgings, Bharat Forge, and Samvardhana Motherson International Limited (SAMIL) have a significant portion of their revenue tied to US exports.

Sona BLW derives 43 per cent of its revenue from the US market, while Bharat Forge’s dependence stands at 38

per cent.

According to industry estimates, India’s auto component exports to the US amounted to $6.79 billion in FY24, whereas imports from the US were $1.4 billion at a 15 per cent duty. Previously, the US imposed minimal or no tariffs on imported components.

“It is the Indian auto components industry that is more likely to face the heat due to the US tariff as exports from here to the US are significant,” an industry executive said on condition of anonymity. “Indian vehicle makers are less likely to be impacted as there are no direct exports of fully built cars from India to the US.”

Anuj Sethi, Senior Director at Crisil Ratings, noted that the tariffs on key components like engines, transmissions, and powertrain parts could squeeze the operating margins of Indian component manufacturers by 125-150 basis points, assuming they fully absorb the costs. He added that approximately 27 per cent of India’s auto component exports are destined for the US.

“Suppliers to Tier I companies or OEMs with end customers in the US will also feel the impact,” Sethi explained. However, he noted that Indian manufacturers with production facilities in the US might offset some losses through better capacity utilisation.

Mrunmayee Jogalekar, Auto and FMCG Research Analyst at Asit C Mehta Investment Intermediates Ltd, echoed these concerns. “The US is not a significant destination for India’s vehicle exports. However, Tata Motors could face an impact through JLR, which derives over 30 per cent of its sales from the US market. With no US manufacturing facility, JLR vehicles will be subject to tariffs, potentially affecting pricing and profitability.”

Jogalekar added that for Indian auto component makers, tariffs could be felt most on critical parts like engines, transmissions, and electrical components. “Companies like Sona Comstar (43 per cent revenue from North America) and Samvardhana Motherson (18 per cent revenue from the region) could be affected, though many other component makers have diversified export markets, reducing the overall impact.”

The Global Trade Research Initiative (GTRI), a think tank, suggested that the impact on India’s auto industry might be limited. “An analysis of India’s auto and auto component exports in 2024 suggests that these tariffs will have minimal impact on Indian exporters,” GTRI Founder Ajay Srivastava said.

Srivastava pointed out that India exported only $8.9 million worth of passenger cars to the US in 2024, a mere 0.13 per cent of the country’s total car exports. Similarly, truck exports to the US stood at $12.5 million, accounting for just 0.89 per cent of India’s total truck exports.

The segment facing the most pressure is auto parts, where the US accounted for $2.2 billion, or 29.1 per cent, of India’s global auto parts exports. However, Srivastava noted that since the 25 per cent tariffs apply to all exporting countries, Indian suppliers might still retain a competitive position. JATO Dynamics India President and Director Ravi G Bhatia remarked that India was not singled out by the tariff increase. “This step will hit for sure, but it is not a ‘Tsunami.’ It is not too much of a big hit, and Indian suppliers will work out how to retain their market share in the US,” he said. Bhatia suggested that India’s low-cost manufacturing could become an advantage, as higher tariffs would lead to increased vehicle prices in the US.

Industry experts suggest Trump’s move could impact Indian automakers’ global expansion, especially in the US EV market. Indian component firms, including Motherson Group, operate in Mexico and Canada under NAFTA. Motherson’s director stressed localisation efforts to mitigate potential

tariff effects. with agency inputs