US Tariffs to Hit 8% of India’s Auto Component Production, Says ICRA

New Delhi, September 17, 2025 – The newly announced 50% US duty on Indian imports is likely to hit close to 8% of India’s total auto component production, says ratings agency ICRA.

Auto component exports contribute to approximately 30% of industry revenues, with the US alone contributing 27% of that amount. ICRA warned that the steep tariff places Indian exporters at a competitive disadvantage compared to other Asian economies.

Competitive Disadvantage for India

While Indian exports are subjected to a 50% tariff, Chinese, Japanese, Vietnamese, and Indonesian exports are subject to a lower duty of 15–30%. Further intensifying the pressure, manufacturers in Mexico and Canada remain exempt under the United States-Mexico-Canada Agreement (USMCA). ICRA added that this disparity highlights the need for India to push forward a bilateral trade agreement with the US to protect its export competitiveness.

Export Growth at Risk

Indian automobile components exports to the US have shown consistent growth, from USD 4.1 billion in FY2021 to an estimated USD 7.3 billion in FY2025. The increase will be hampered by the increased tariffs, though.

India’s auto component exports are rightly diversified globally, with Europe holding the largest share of 30%, followed by the United States at 27%. The Asian market takes up 26%, indicating high regional demand. Latin America contributes 3%, while the other 13% is distributed in other regions, indicating India’s extensive global reach in the industry. On the other hand, the local market generates 56% of the sector’s sales, while replacement demand is responsible for 15%.

Key Takeaway

While exports constitute a major support for India’s auto component industry, ICRA highlighted that clearing tariff barriers via a trade agreement with the US will be important in sustaining growth momentum and protecting the sector from competitive pressures.

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