How Donald Trump’s Tariff Imposition Affects Indian Automotive Industry?

US President Donald Trump is set to impose a 25% tariff on imported cars and autoparts from April 3. The move is aimed at revising the automotive industry in the US by incentivising domestic investment from automakers.

The measure is not only limited to fully assembled vehicles but also extends to components such as engines, transmissions, powertrain systems, and electrical assemblies. As per White House, the move is expected to reap $100 billion annually.

How is India going to be impacted?

Though India's automobile exports to the US remain relatively small compared to Mexico, Canada, and Japan, the proposed measure can significantly impact India's auto components industry.

As per reports, India exported nearly $1.5 billion worth of auto parts to the U.S in 2023. The new tariffs will increase input costs for US-based automakers and could thereby reduce demand for Indian parts. Suppliers may face difficulty in maintaining their profit margins and will also be forced to absorb added costs or redirect exports to other regions.

Shares of Tata Motors fell by 5% on March 27 as its subsidiary Jaguar Land Rover has sizable exposure to the US market.

Facts

1. Jaguar Land Rover (JLR), the subsidiary of Tata Motors exports luxury vehicles mainly from the UK and Europe to the US. The tariffs could escalate costs, which may prompt JLR to reevaluate its pricing models or face margin pressure in an already tight luxury segment.

2. Indian auto component manufacturers may face greater potential consequences compared to vehicle makers due to US President Donald Trump's tariff policies, industry experts noted. “It is the Indian auto components industry that is more likely to face the heat due to the US tariff as exports from here to the US are significant. Indian vehicle makers are less likely to be impacted as there are no direct exports of fully built cars from India to the US,” an industry executive told PTI.

3. Lately, India has emerged as one of most significant players in the auto parts sector, but the current developments may act as a stumbling block. Large Indian suppliers such as Bharat Forge and Motherson Sumi may need to rethink their global strategies. Exploring new opportunities in Europe, Southeast Asia, or Africa could become essential to enable long term growth.