Latest news with #ShamsherDewan
NDTV
29-04-2025
- Automotive
- NDTV
Trumps Tariffs: Rs 4.5K Crore Revenue Hit Expected For Auto Component Industry
New Delhi: Leading auto component manufacturers could take a revenue hit of up to Rs 4,500 crore in the current fiscal due to dip in overseas shipments stemming from the tariff-related impact, ratings firm Icra said on Monday. Icra expects the revenue growth of Indian auto component industry, represented by sample of 46 auto ancillaries with aggregate annual revenues of over Rs 3 lakh crore in FY2024, to ease to 6-8 per cent in FY2026, against 8-10 per cent projected earlier, if there is mid-to-high single-digit revenue decline in exports to the US, stemming from the tariff-related impact, it said in a statement. The steep increase in import tariffs imposed recently by the US is estimated to burden the entire supply chain with an incremental cost of around Rs 9,000 crore, which will need to be borne by the US consumers, US importers, and Indian exporters, it said. The extent to which the Indian auto component exporters share the cost burden will be contingent on their competitiveness and the price elasticity of the products exported. "While the auto component suppliers with whom Icra has interacted indicate that most of the incremental costs would be passed on, however, as in any buyer-supplier negotiation, the extent of pass-through would depend on the supplier's criticality, share of business, competition, and technological intensity of the components supplied," Icra Senior Vice President and Head - Corporate Ratings Group Shamsher Dewan said. If, on average, 30-50 per cent of the incremental tariff costs are to be absorbed by the Indian auto component exporters, Icra estimates an earnings impact of roughly Rs 2,700-4,500 crore, which is 3-6 per cent of the auto component industry's operating profits and 10-15 per cent of the auto component exporters' operating profits, he added. The Indian auto component industry demand continues to benefit from a diversified mix of end-user segments and geographies, with over 70 per cent of its revenues coming from domestic sales. The US constituted only close to 8 per cent of the overall industry revenues in FY2024. Export of auto components to the US grew at a compound annual growth rate (CAGR) of 15 per cent during FY2020-2024, Icra noted. The US government imposed a 25 per cent tariff on imported key automobile parts (engine, transmission, powertrain, and electrical components) vide an order dated March 26, 2025, effective May 3, 2025. About 65 per cent of India's auto component export basket is estimated to fall under the 25 per cent import tariff category. Prior to this, a 25 per cent tariff was imposed on import of steel and aluminium content in auto parts. Subsequent to the order dated March 26, 2025, a reciprocal tariff of 26 per cent was imposed on exports from India to the US, on which there is a temporary pause for 90 days, but with a 10 per cent ad valorem duty still applicable. Products that fall under the US-Mexico-Canada Arrangement (USMCA) are exempted at present.
Time of India
29-04-2025
- Automotive
- Time of India
US tariffs may erode Rs 2700-4500 cr of operating profits of Indian auto component exporters: ICRA
The Indian auto component industry faces fresh headwinds as newly imposed US tariffs threaten to dent exporters' earnings significantly, according to ICRA . The rating agency estimates that the tariff-related impact could erode operating profits by Rs2,700-4,500 crore, equivalent to 10-15 per cent of the operating profits of auto component exporters and 3-6 per cent of the overall industry's operating profits. ICRA projects that revenue growth for the Indian auto component sector, represented by a sample of 46 key players with combined annual revenues of over Rs3 lakh crore in FY2024, could moderate to 6-8 per cent in FY2026, down from the earlier forecast of 8-10 per cent. This downgrade is largely attributed to a potential mid- to high-single-digit decline in exports to the US, following a sharp escalation in import tariffs. Operating margins for the industry are expected to soften by 50-100 basis points (bps) to 10.5-11.5 per cent in FY2026, while the impact on exporters could be even sharper, with a projected margin contraction of 150-250 bps. Despite these pressures, ICRA maintains that debt metrics and liquidity are likely to remain comfortable for most exporters in its sample, although margins could decline and working capital requirements may rise. Shamsher Dewan , Senior Vice President and Head - Corporate Ratings Group, ICRA Limited, "While the auto component suppliers with whom ICRA has interacted indicate that most of the incremental costs would be passed on, however, as in any buyer-supplier negotiation, the extent of pass-through would depend on the supplier's criticality, share of business, competition, and technological intensity of the components supplied." However, Dewan cautioned that rising economic uncertainty, declining vehicle sales volumes, and tepid replacement demand in the US pose additional risks, alongside intensifying competition in other export geographies such as Europe and Asia. Roughly 65 per cent of India's auto component export basket is estimated to be affected by the new tariffs. Although a reciprocal tariff by India was temporarily paused for 90 days, an ad valorem duty of 10 per cent remains applicable. Despite the short-term challenges, ICRA believes India could benefit in the medium term if its cost competitiveness improves relative to China, particularly as global OEMs reassess their sourcing strategies. Some Indian players have already reported increased inquiries from US importers in recent weeks, indicating potential future opportunities.
New Indian Express
28-04-2025
- Automotive
- New Indian Express
US tariff: Auto component exporters may take Rs 2,700-4,500 crore hit
The auto component industry may see the topline growth decelerating to 6-8% this fiscal, as against 8-10% projected earlier if higher tariffs get finally imposed on exports to the US. This may shave `2,700-4,500 crore off the industry's net income, says a report. The likely tariff hike is estimated to burden the entire supply chain with an incremental cost of about `9,000 crore, which will need to be borne by the US consumers, US importers, and exporters, Icra Ratings said on Monday in a report based a sample of 46 auto ancillaries with aggregate annual revenue of more than `3,00,000 crore in FY24, which is nearly half the industry size. Operating margins are likely to moderate by 50-100 bps against earlier estimates of 10.5-11.5% this fiscal in a scenario where 30-50% of the incremental costs are to be absorbed. Specifically for exporters, the decline can be higher at 150-250 bps. The agency expects debt metrics and liquidity to remain comfortable for most exporters in its sample set despite potential decline in margins and increase in working capital requirements. The domestic auto component industry demand continues to benefit from a diversified mix of end-user segments and geographies, with over 70% of revenue coming from domestic sales and the US constituted only close to 8% of the total industry revenue in FY24. Exports to the US grew at a compounded annual rate of 15% during FY20-24. According to Shamsher Dewan, senior vice-president at the agency, though most auto component suppliers have indicated that they will pass on most of their incremental cost, if an average of 30-50% of incremental tariff cost is absorbed by the exporters, this will impact the earnings by nearly `2,700-4,500 crore, which is 3-6% of the operating profit of the industry and 10-15% of operating profit of the component exporters. The US has imposed 25% tariff on imported engines, transmission, powertrains, and electrical components from May 3 and about 65% of the domestic auto component export basket is estimated to fall under the 25% import tariff category. Prior to this, a 25% tariff was imposed on imported steel and aluminium contents in auto parts from March 12. Though 26% reciprocal tariffs announced is paused till July 7, there is a 10% ad valorem duty applicable from April 12. This is steep as Indian auto components exports had only 2.5% import duty earlier.
Economic Times
28-04-2025
- Automotive
- Economic Times
U.S. tariff hike can slash Indian auto component exporters' earnings by up to Rs 4,500 crore, ICRA warns
Domestic resilience to offset export decline Live Events Mixed impact across auto ancillaries Evolving tariff landscape and market opportunities Broader sector sentiment and stock performance (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel Indian auto component exporters are set to face a significant earnings hit between Rs 2,700 crore and Rs 4,500 crore due to new tariff hikes imposed by the US, according to brokerage ICRA . While the tariff impact threatens profit margins, the overall resilience of the Indian auto industry , particularly in domestic markets, may help cushion the new U.S. tariffs, which came into effect in May 2025, are expected to burden the industry with incremental costs of Rs. 9,000 crore, with Indian exporters potentially absorbing 30-50% of this cost, ICRA has estimated that these additional costs will reduce operating margins by 50-100 basis points in FY2026. The brokerage said that the earnings impact for the broader auto component industry could amount to 3-6% of operating profits, while exporters alone could see a 10-15% reduction in earnings. Notably, a subset of Indian manufacturers with U.S.-based operations are shielded from the tariff's the U.S. market has been a growing export destination for Indian auto components, accounting for 8% of the industry's total revenues in FY2024, ICRA noted that the tariff hikes are likely to reduce export growth. However, the brokerage pointed out that the Indian auto component sector continues to benefit from a diversified mix of end-user segments, with over 70% of its revenue generated from domestic outlook for the sector has shifted, revising revenue growth expectations for FY2026 down to 6-8%, from a previous forecast of 8-10%. This adjustment takes into account the potential decline in export revenues to the U.S., which may drop by mid to high single the export setback, the domestic market remains robust, with leading players such as Mahindra & Mahindra (M&M) and Samvardhana Motherson benefiting from strong product portfolios and global also delved into the financial resilience of auto ancillary companies in light of the tariff hikes. Notably, the brokerage said that while the increase in tariffs will put pressure on operating margins, liquidity and debt metrics for most exporters are expected to remain comfortable. This outlook contrasts with the broader challenges facing the sector, including subdued growth and rising global competition, particularly from Chinese manufacturers."While the auto component suppliers with whom ICRA has interacted indicate that most of the incremental costs would be passed on, the extent of pass-through would depend on the supplier's criticality, share of business, competition, and technological intensity of the components supplied," said Shamsher Dewan, Senior Vice President and Head – Corporate Ratings at further said that the shifting dynamics of global auto markets—such as the growing competition from Chinese manufacturers—will play a crucial role in the sector's the immediate impact of the tariff hikes may pressure margins, ICRA suggested that Indian exporters could benefit from medium-term opportunities. Some firms have indicated additional inquiries from U.S. importers in the last few weeks, the brokerage noted, which could indicate potential market share gains from Chinese competitors, particularly if the tariff structure remains brokerage also highlighted the ongoing evolution of global trade negotiations, suggesting that trade policies may further shape the landscape for Indian exporters. ICRA suggested that Indian exporters' diversified markets—such as companies like TVS Motor and Eicher Motors performing well in both domestic and international markets—may help mitigate some of the tariff-related automotive sector has faced a turbulent fiscal year FY25, with subdued sentiment, particularly in the second half. Despite the challenges, some companies emerged as strong performers. TVS Motor and Eicher Motors, buoyed by urban recovery and premiumisation trends, have continued to see positive growth. Among four-wheelers, Mahindra & Mahindra (M&M) stands out with a robust SUV portfolio and a solid agricultural equipment the auto ancillary space, Samvardhana Motherson is set to benefit from its global diversification strategy. However, stock performance across the sector in 2025 has largely been negative, with steep declines in auto ancillary stocks, reflecting the broader global uncertainty. Companies such as TVS, Eicher, Maruti Suzuki , and Ashok Leyland have been exceptions, showing resilience amid the read | Is the auto sector a buy or avoid right now? Amnish Aggarwal weighs in(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
&w=3840&q=100)
Business Standard
28-04-2025
- Automotive
- Business Standard
US tariff may impact Indian autoparts exporters by up to Rs 4,500 cr: ICRA
Indian auto component exporters could suffer an earnings impact in the range of Rs 2,700-4,500 crore following the recent imposition of steep US tariffs on key automotive parts, credit rating agency ICRA said in a note on Monday. While domestic demand continues to account for the lion's share of revenues, the new 25 per cent tariff on items like engines, transmissions, and electrical components is expected to moderate the auto component industry's overall revenue growth to 6-8 per cent in FY26, down from the earlier projection of 8-10 per cent. The United States, which accounted for around 8 per cent of the Indian auto component industry's revenues in FY24, recently imposed a 25 per cent import duty effective no later than May 3, 2025. About 65 per cent of India's auto component export basket is estimated to fall under this tariff regime. Prior to this, a 25 per cent tariff on steel and aluminium content in auto parts had already been implemented in March 2025. ICRA estimates that if Indian exporters are forced to absorb 30-50 per cent of the additional costs, the potential earnings impact could be 3-6 per cent of the auto component industry's operating profits and a steeper 10-15 per cent for exporters alone. Consequently, operating margins could moderate by 50-100 basis points (bps) across the industry, and by 150-250 bps for exporters specifically, in FY26. "While the auto component suppliers with whom ICRA has interacted indicate that most of the incremental costs would be passed on, the extent of pass-through would depend on factors such as the supplier's criticality, share of business, competition, and the technological intensity of the components supplied," said Shamsher Dewan, senior vice-president and head of corporate ratings at ICRA. Despite the expected pressures, debt metrics and liquidity are likely to remain comfortable for most exporters, the agency said. Exporters with manufacturing operations within the US would also be partly insulated from the new tariffs. ICRA pointed out that switching suppliers in the auto component industry typically involves high costs and long product development and approval cycles, suggesting that the loss of business from US customers is unlikely in the near term. Moreover, Indian suppliers may eventually benefit from cost competitiveness vis-à-vis Chinese counterparts if tariffs on Chinese products persist, Dewan noted. Indian auto component exports to the US had grown at a compound annual growth rate of 15 per cent between FY20 and FY24, driven by rising supplies to new platforms amid vendor diversification by global automakers and Tier-I suppliers. However, the new tariffs have introduced fresh uncertainty, alongside other downside risks such as declining US automobile sales and weakness in the replacement market. Despite the challenges, the Indian auto component industry retains a significant cushion in its domestic market, which contributed over 70 per cent of overall revenues in FY24. Following the March 26, 2025 order imposing 25 per cent tariffs, a reciprocal 26 per cent tariff on US exports to India was announced but temporarily paused for 90 days, though a 10 per cent ad valorem duty remains in place. Products covered under the US-Mexico-Canada Agreement (USMCA) remain exempt from the new duties. Industry executives also flagged the possibility of price pressures building in other export geographies such as Europe and Asia, particularly with intensifying Chinese competition. Component manufacturers are proactively strategising to mitigate adverse impacts. From increased localisation to strategic market diversification, industry leaders are recalibrating operations to maintain resilience in an evolving global trade environment. Leading players such as Kinetic Engineering and Samvardhana Motherson International (SAMIL) are placing strong emphasis on localisation, long-term partnerships, and a cautious yet opportunistic outlook on market diversification. Ajinkya Firodia, vice-chairman and managing director of Kinetic Engineering, told Business Standard last week that Kinetic is working closely with its global original equipment manufacturer (OEM) customers to assess potential impacts and build long-term solutions. 'Auto programmes typically span seven years, involving extensive prototyping, feasibility studies, validation and testing. This stable structure allows us to plan ahead and mitigate risks effectively,' he said.
