Introduction of 25% Tariffs on Automobiles and Auto Parts
The White House has announced that a 25% tariffs will be applied to automobiles starting April 3, citing national security concerns. This decision comes a day after US reciprocal tariffs are set to take effect. Auto parts will also be subject to similar tariffs by May 3, 2025, unless the government decides to modify, reduce, or remove them.
Impact on India’s Auto Component Exports
The decision to impose tariffs on automobiles and auto parts has raised concerns about the future of India’s auto component exports to the US, which were valued at nearly $7 billion in FY24. The tariffs will affect India’s significant presence in the US market, particularly for auto components, as the US is one of the largest export destinations for Indian auto parts.
Tariff Details and Potential Expansion
The 25% tariffs will apply not only to fully assembled vehicles but also to key auto parts such as engines, transmissions, powertrain parts, and electrical components. The list of affected parts may expand in the future. Currently, India’s largest auto component exports to the US include engine components, powertrains, and transmissions.
Concerns Over Selective Relaxations and Market Demand
Indian auto exporters are concerned that selective relaxations in tariffs could harm their exports. They are also worried that US demand might fall if the tariffs cause prices to rise. There is also fear that China might undercut India’s pricing with opaque government subsidies. North America, especially the US, remains a key market for India’s auto components, contributing significantly to export growth in FY24.
India’s Auto Component Export Growth in FY24
India’s auto component exports reached $21.2 billion in FY24, showing a growth of 5.5%. The main export markets were North America and Europe, each contributing about 32% to the total exports. Despite this growth, the overall growth rate remained flat compared to the previous year. (Also read: Tiger Woods and Vanessa Trump’s Shocking Romance: Inside Their Private Relationship)
Warnings Against Reducing Import Duties
A report from the Global Trade and Research Institute (GTRI) cautioned against reducing import duties on passenger cars to avoid US tariffs. It highlighted the example of Australia, where reducing tariffs led to the collapse of its domestic auto manufacturing industry in the 1980s. Given that the Indian auto sector accounts for one-third of the country’s manufacturing GDP, the report emphasized the need to preserve its stability.
Today, Trump introduced a 25% tariff on ALL vehicles not made in the United States. This tariff will go into effect on April 2nd. About 40% of all new cars sold in the US are imported, so this tariff is a big deal.
— Sawyer Merritt (@SawyerMerritt) March 26, 2025
This is a breakdown of where cars sold in the US are made:
•… pic.twitter.com/4afYiJvtph
US Imports of Auto Parts
In the previous year, the US imported $89 billion worth of auto parts from around the world. Mexico was the largest supplier, accounting for $36 billion, followed by China at $10.1 billion, and India at $2.2 billion. The new tariffs could potentially create new opportunities for India in the US market.
Indian Companies in the US Auto Industry
Several Indian auto component manufacturers, such as Sona Comstar, Bharat Forge, Motherson Group, TVS Holdings, and JK Fenner, have subsidiaries or joint ventures in the US. These new tariffs could encourage them to expand their operations in the US. However, making competitive products within the US could be difficult due to high costs and time constraints.
Challenges of Manufacturing Auto Parts in the US
Vivek Vikram Singh, the MD and CEO of Sona Comstar, noted that producing auto parts in the US would be expensive and time-consuming, even with the new tariffs. He questioned how the US automotive industry would cope with tariffs on imports from Mexico, China, and India. He suggested that the US might have to accept cars that are 15-20% more expensive due to the new tariffs.
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