US Auto Tariff Impact Slightly Negative for Indian Automakers: CRISIL

Moneylife Digital Team 01 April 2025

Economy & Nation

The Trump administration in the US has announced a 25% tariff on imports of automobiles and some components to protect its industry, supply chains and national security. However, given India’s relatively small share in exporting vehicles and components to the US, the 25% tariff on imports by the US will have a slightly negative impact on domestic manufacturers, says a research note.

In a report, rating agency CRISIL says, “The share of exports in India’s automotive production stands at just 15%, which means the exposure of domestic component manufacturers to the US is small at 4.2%. Further, accounting for the components under tariffs, this exposure would whittle down further to 3.5% of the annual revenue from auto components, thus limiting impact. This limited exports to the US is what will shield the revenue of component makers.”

“However, a potential reduction in the competitiveness of domestic component makers because of increased prices in the US will have a bearing. This impact on India and some other countries would, in turn, benefit Mexico and Canada, which are covered under the United States-Mexico-Canada Agreement (USMCA) and account for about 46% of overall imports to the US,” it added.

In FY23-24, India’s exports of passenger vehicles (PVs) and commercial vehicles (CVs), as a percentage of overall production, stood at about 15% and around 8%, respectively, while the share of the US in these exports was relatively small at 0.21% and 3%, respectively.

For passenger cars and light trucks, the majority of Indian exports are to the Middle Eastern, African and Latin American countries, such as Saudi Arabia, UAE, South Africa, Mexico and Chile.

After the exit of General Motors and Ford from India, no US major had an Indian manufacturing base for exporting back to their country.

“Given the meagre share of India’s exports of PVs and CVs to that country, the tariffs imposed would have minimal impact on original equipment manufacturers (OEMs) here. However, India’s share of auto component exports to the US is significant at 28%. Within this, powertrain parts, transmissions, engines, and electricals account for 40%, 29%, 13% and 2%, respectively. Cumulatively, they account for about 84% of all automotive component exports from India to the US,” CRISIL says.

The new US tariffs will apply from 3 April 2025 on imports of PVs and light trucks and a date to be announced but not later than 3 May 2025 on components such as engines, transmissions, powertrain parts and electricals.

However, imports from Mexico and Canada will get preferential treatment under the USMCA and remain tariff-free till a procedure is devised to apply tariffs only to the non-US components.

Comments