Trump’s auto tariffs unlikely to dent India’s automobile sector: report

New Delhi: US President Donald Trump’s latest announcement of a 25% tariff on completely built vehicles and auto parts from 3 April has sent shockwaves through the global automobile industry. However, an analysis of India’s auto exports suggests the impact on the country’s automobile sector will be minimal, with some segments even seeing potential opportunities.

India’s automobile exports to the US in 2024 were relatively small, making the domestic sector largely insulated from Trump’s tariff hikes, the Global Trade Research Initiative (GTRI) said in a report on Thursday.

Passenger car exports from India to the US in 2024 amounted to just $8.9 million, commerce ministry data show. That was a fraction of India’s $6.98 billion worth of total car exports last year, indicating that Trump’s new tariffs would have little to no impact on India’s growing car export industry, as per the GTRI report.

GTRI founder Ajay Srivastava cautioned that if India decides to reduce tariffs on passenger car imports to placate the US, it would be counterproductive. Srivastava drew reference to Australia’s experience in the late 1980s, when its automobile manufacturing industry collapsed after the country slashed its auto import tariff from 45% to 5%.

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A US delegation led by Brendan Lynch, assistant US trade representative for South and Central Asia, is in India, holding in-person meetings with Indian trade negotiators to restructure tariffs and align with US tariff levels on several products. The move aims to reduce the trade deficit, which stood at $35 billion with India in 2023-24.

Given that India’s auto sector contributes nearly a third of its manufacturing GDP, protecting its stability remains a priority, GTRI said in its report.

The impact of the US auto tariffs on truck exports is also expected to be marginal. India exported $12.5 million worth of trucks to the US in 2024, accounting for only 0.89% of its global truck exports.

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Auto parts a worry

India’s auto parts sector stands out as the most exposed category to the recent US tariffs, with India exporting $2.2 billion worth of components to the US in 2024, amounting to 29.1% of the country’s global auto parts exports, as per the commerce ministry data.

While this figure appears significant, a closer look at the broader market dynamics suggests India may not be at a major disadvantage. The US imported $89 billion worth of auto parts last year, with Mexico supplying $36 billion and China contributing $10.1 billion.

However, some concern arises in the segment of car chassis fitted with engines, where the US accounted for $28.2 million of India’s $246.9 million in global exports, representing an 11.4% share in 2024. Despite this, the segment remains relatively small within India’s overall auto export portfolio.

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Given that the 25% tariff applies across all exporting countries, India’s competitive position remains intact, GTRI said.

“India has a strong foothold in labour-intensive manufacturing and benefits from competitive import tariff structures, ranging from 0 to 7.5%. If suppliers can adjust to the new tariff landscape, India’s market share in the US could potentially increase over time,” said Srivastava, a former Indian Trade Service officer.

An opportunity awaits

At least one analyst believes US’ new auto tariffs could even present an opportunity for Indian auto component manufacturers.

“With the global auto industry facing potential disruptions, India’s limited direct exposure and competitive edge in auto parts indicate that the impact may be manageable,” said Abhash Kumar, assistant professor of economics at Delhi University. “Rather than rushing into countermeasures, a strategic and steady approach could help the country’s automotive sector navigate the changes while exploring new opportunities for growth.”

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Mint reported earlier this month how Trump’s demand that India scrap tariffs on motorcycles it imports from the US could impact the domestic market for superbikes.

India’s exports of motorcycle parts and accessories had risen sharply from $558.05 million in April-January of FY22 to $709.22 million in the same period of FY24, reflecting a 27.09% growth over three years.

This was driven by government initiatives such as the production-linked incentive (PLI) scheme, which has boosted domestic manufacturing and strengthened the sector’s global presence.

At the same time, as per commerce ministry data, imports of these components declined from $408.59 million to $371.82 million over the same period, indicating a growing reliance on domestic production.

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