India To lose 20% Of Auto Component Export To US; Should Focus On High Value Parts & New Markets: Experts

Entrepreneur

a day ago

Opinions expressed by Entrepreneur contributors are their own.
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
The recent imposition of higher US tariffs presents a significant challenge for Indian auto component manufacturers. Almost 15-20 percent of India's U.S.-bound auto‑component exports could be lost in the short term. While a 25 percent duty was already in effect for the sector from May 3, 2025 , the additional reciprocal 25 percent tariff effective August 2025, will take the total to 50 per cent from August 27. "In India's auto‑component exports to the U.S., roughly 30-40 percent comes from programs in which India is one of multiple approved suppliers with a defined share of business (SOB). In these cases, U.S. buyers already have qualified suppliers in other countries—such as Mexico or China—making the same part number to identical specifications. That means they can quickly reallocate orders outside India, often within weeks, without fresh tooling or lengthy PPAP approvals," said Ravindra Patki, managing partner, Vector Consulting Group.
The remaining 60-70 percent of exports are tied to India‑exclusive tooling or safety‑critical parts that require months to resource. "This SOB‑driven segment—worth about $2.1–2.8 billion of India's $7 billion in U.S.-bound auto‑component exports—is at the highest immediate risk from new tariffs. However, even in SOB programs, actual shifts depend on alternate suppliers' spare capacity, logistics cost, and the duration of the tariff—so, in practice, perhaps only half of this at‑risk volume would move quickly. Almost 15-20 percent of India's U.S.-bound auto‑component exports could be lost in the short term, while the rest faces a slower, more complex transition," he added.
Even the initial 25 percent duty imposed on the automotive sector by the US fundamentally alters the competitive landscape for US exports in the short term. In order to quickly adjust India's plans to protect the strong export growth, especially since the US was one of the biggest markets for auto parts in FY2025, India needs to startegise. "To lessen this impact, Indian manufacturers should actively look into setting up some production closer to the US. Countries like Mexico and Canada, thanks to the USMCA trade agreement, allow our parts to enter the US without extra taxes if they meet certain local content rules," said Saurabh Agarwal, partner & automotive tax leader, EY India.
The Automotive Component Manufacturers Association of India (ACMA) said the United States government's decision to impose higher and additional tariffs on select Indian imports—including auto components—presents near-term headwinds for the industry but also reinforces the need to build competitiveness and diversify export markets.
By focusing on new markets and making specialized, high-value parts that aren't tied to traditional engines, India can turn this challenge into a chance to become even more competitive globally and achieve lasting growth. "It's crucial to aggressively expand into other markets. The new trade agreement with the UK, signed recently, gives India immediate tax-free access for most auto parts, which is a big advantage. We also need to push hard for a quick trade deal with the European Union, using the success of the UK agreement to help us. Beyond that, the growing demand in developing countries in Asia, Africa, and Latin America offers huge potential for long-term growth," Agarwal from EY added.
Sharing a similar sentiment, Shradha Suri Marwah, president, ACMA, said, "The recent decision by the United States to impose higher and additional tariffs on certain imports from India underscores the shifting landscape of global trade. While this development presents near-term headwinds for Indian exporters, it also underscores the importance of enhancing our sector's competitiveness, strengthening value addition, and exploring new and diversified markets."
The United States remains a key trading partner for Indian auto component manufacturers. In FY25, it accounted for 27 per cent of India's total auto component exports, which stood at $22.9 billion, and 7 per cent of imports, worth $22.4 billion.
"The latest tariff changes are expected to have a mixed impact on the auto sector. While they may offer protection to domestic manufacturers in certain segments, they could also lead to higher input costs in others, especially where imports form a key part of the supply chain. For the mobility services industry, including car rentals and leasing, we will continue to assess these changes closely to ensure cost-efficiency for customers while aligning with evolving regulatory frameworks," said Aman Naagar, MD, AVIS India.
Union roads transport minister Nitin Gadkari believes US President Donald Trump's tariff threats won't hurt India much as the domestic automobile industry is strong enough to cater to the world market and not dependent on just "one or two nations".