US Tariffs to Affect 8% of India’s Auto Component Production: ICRA

High tariffs imposed by the United States are expected to affect close to 8% of India’s overall auto component production, according to ratings agency ICRA. The sector earns nearly 30% of its revenues from exports, and the US accounts for 27% of this export share.

India at a Disadvantage

As per the news reports, the recently announced 50% tariff on Indian goods places local exporters at a competitive disadvantage. In comparison, exporters from China, Japan, Vietnam, and Indonesia face lower duties of 15-30%. 

Manufacturers in Mexico and Canada are exempt from these tariffs under the United States-Mexico-Canada Agreement (USMCA), adding further pressure on Indian shipments.

Growth in Exports to the US

Despite the current challenges, exports of auto components from India to the US have been steadily increasing over the past few years. Shipments rose from $4.1 billion in FY2021 to $6 billion in FY2022, $6.5 billion in FY2023, and $6.8 billion in FY2024. As per the news reports, estimates project the figure could reach $7.3 billion in FY2025.

Global and Domestic Sales Split

ICRA data shows that exports contribute 29% to the Indian auto component industry’s revenues. Domestic sales form the largest share at 56%, while replacement demand accounts for 15%. Within exports, Europe contributes 30%, the US 27%, Asia 26%, Latin America 3%, and other regions 13%.

Trade Agreement Highlighted

The disparity in tariff structures shows the importance of a possible bilateral trade agreement between India and the US. Without such an arrangement, Indian exporters may find it difficult to sustain their position in the American market.

Read more: Commerce and Industry Minister Piyush Goyal's UAE Visit Set for September 18-19!

Conclusion

India’s auto component industry has recorded steady growth in exports, particularly to the US. However, the imposition of a 50% tariff could affect nearly 8% of its total production, making tariff negotiations and trade agreements a key factor for the sector’s stability.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.