Trump’s 25% Auto Tariff to Have Minimal Impact on India’s Car Exports, but Auto Parts Face Exposure

US President Donald Trump’s recent announcement of a 25% tariff on completely built vehicles and auto parts, effective April 3, has triggered concern across the global automobile industry. However, a new report by the Global Trade Research Initiative (GTRI) suggests that India’s auto exports, particularly in cars and trucks, are largely insulated from the impact of the new US tariffs.

Minimal Impact on India’s Car and Truck Exports

India’s passenger car exports to the US in 2024 stood at just $8.9 million, a small share of its total $6.98 billion worth of car exports. Similarly, truck exports to the US amounted to $12.5 million, representing just 0.89% of India’s global truck shipments. As such, GTRI concludes that the new US tariffs are unlikely to significantly affect India’s automobile export momentum.

The report cautions, however, against India reducing its own auto import tariffs in response to US pressure. Drawing a comparison with Australia’s auto sector collapse after cutting tariffs in the 1980s, GTRI founder Ajay Srivastava warned that any such move would undermine India’s manufacturing base, which contributes nearly a third of the country’s overall manufacturing GDP.

Auto Components Sector More Vulnerable

The auto parts segment presents a different picture. In 2024, India exported $2.2 billion worth of auto components to the US, accounting for 29.1% of its global auto parts exports. Although this figure signals exposure, Srivastava pointed out that the US imports a much larger volume of parts from countries like Mexico ($36 billion) and China ($10.1 billion), which gives India room to stay competitive.

One area of concern is the export of car chassis fitted with engines, where the US represents 11.4% of India’s global exports in that segment. While the share is notable, the segment remains relatively small within the broader export portfolio.

Since the 25% US tariff is applicable to all countries, India’s relative competitive advantage may still hold, the report said. India’s import tariffs for parts range between 0% and 7.5%, making its manufacturing landscape cost-effective and potentially attractive for global suppliers seeking alternatives to China or Mexico.

Motorcycle Components Show Growth Potential

GTRI also highlighted a positive trend in India’s motorcycle parts and accessories sector. Exports rose from $558.05 million in April-January FY22 to $709.22 million in the same period of FY24, registering a 27.09% growth. The Production-Linked Incentive (PLI) scheme has played a key role in bolstering domestic manufacturing and global competitiveness.

Meanwhile, imports of motorcycle parts fell from $408.59 million to $371.82 million over the same period, indicating stronger self-reliance in domestic sourcing.

Conclusion

While Trump’s new auto tariff is unlikely to shake India’s car or truck exports, the auto parts sector, especially components with high export concentration to the US, could face some short-term headwinds. However, with strong government incentives and a competitive manufacturing base, India is well-positioned to navigate the new trade landscape—and may even emerge stronger in certain product categories.

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