Indian Auto Exporters May Face ₹2,700-4,500 Crore Hit from US Tariffs: ICRA

Recent increases in US tariffs may result in a ₹2,700-4,500 crore earnings impact for Indian auto component exporters, ICRA said, as per the reports. From May 3, 2025, the US has imposed a 25% duty on key auto parts such as engines and transmissions. Previously, the duty on these components was 2.5%. Around 65% of India’s auto component exports to the US are now covered under the new tariff category.

Revenue Growth Estimates Lowered

ICRA has revised its revenue growth projection for the Indian auto component sector to 6-8% for FY2026, down from the earlier estimate of 8-10%. This revision is based on an expected mid to high single-digit decline in exports to the US. The projection is based on a sample of 46 auto ancillary companies, whose combined FY2024 revenue exceeds ₹3,00,000 crore.

Impact on Margins

The industry’s operating margins are expected to reduce by 50-100 basis points to a range of 10.5-11.5% in FY2026. Exporters absorbing 30-50% of the incremental costs could face a steeper decline of 150-250 basis points. ICRA estimates that this could lead to a 3-6% hit to industry-wide operating profits and a 10-15% impact on exporters’ profits.

Domestic Market Situation

Domestic demand, which accounts for over 70% of the industry’s revenue, continues to provide support. Debt metrics and liquidity for most exporters are expected to remain stable despite higher working capital needs.

Read more: Trump Imposes 25% Tariff on Indian Auto Exports; Tata Motors, Bajaj Auto & More Slip

Other Developments

India has imposed a reciprocal 26% tariff on US exports, which is temporarily paused for 90 days. A 10% ad valorem duty remains in place. Products traded under the US-Mexico-Canada Agreement (USMCA) are exempt from the new US tariffs. Some exporters with manufacturing bases in the US are likely to avoid the tariff impact.

Conclusion

The Indian auto component sector is expected to experience earnings pressure due to increased costs from US tariffs, with domestic demand helping to limit the overall impact.

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