US Tariffs Rattle India's Auto Sector: Rising Challenges and Hidden Opportunities

Recent tariff measures by the US are unlikely to impact India's passenger vehicle exports due to their minor share, but auto parts exports face challenges. India's auto component exports could see negative revenue effects, though opportunities may arise from similar tariffs on other nations, prompting diversification and strategy refinements.

In a recent announcement, the Trump administration has imposed a 27% reciprocal tariff on India in response to high import duties on American goods levied by New Delhi. However, this move is expected to have negligible impact on India's passenger vehicle exports due to their minimal volume, according to ICRA.

The order primarily excludes passenger vehicles, already subjected to a 25% tariff since March 2025, but includes auto components, an area where India has significant export stakes, particularly in engines, transmissions, and powertrain parts. The tariffs are projected to affect the revenue and earnings of exporters reliant on the US market.

While immediate challenges loom, especially with impending additional tariffs on auto parts, experts suggest that similar tariff hikes on competing nations could open new avenues. India's exporters are actively exploring diversification into other regions and employing strategies to mitigate impacts and capitalize on long-term opportunities.

(With inputs from agencies.)