Indian automakers are likely to see limited impact of US President Donald Trump’s reciprocal tariffs on the world’s fifth largest economy.
“OEMs (original equipment manufacturers) are largely insulated due to heavy localisation and sales, and minimal US exports,” Puneet Gupta, director at S&P Global Mobility – India and Asean, told NDTV Profit over the phone on Friday. “Remember, India is a preferred partner of the US, and the only alternative to China for American automakers (to source auto components from).”
Royal Enfield, the motorcycling unit of Eicher Motors Ltd., may see some impact, as the US is a major export market for its 650 cc motorcycles.
A more significant impact may be seen in the auto components industry.
Sansera Engineering Ltd., Suprajit Engineering Ltd., Balkrishna Industries Ltd., Sona Comstar and Motherson Group have significant exposure to the US, according to Varun Baxi, research analyst at Antique Stock Broking Ltd.
“They are already exploring workarounds to sidestep the US tariffs,” such as “routing exports through other countries, where they may have operations”.
On Thursday, Trump ordered his administration to consider imposing reciprocal tariffs on numerous trading partners, raising the prospect of a wider campaign against a global system he says is tilted against the US.
“I’ve decided, for purposes of fairness, that I’ll charge a reciprocal tariff, meaning whatever countries charge the United States of America,” Trump said in the Oval Office. “In almost all cases, they’re charging us vastly more than we charge them, but those days are over.”
He singled out India for its high tariff barriers.
“PM Modi recently announced the reductions to India’s unfair, very strong tariffs that limit US access to the Indian market, very strongly. And really it’s a big problem, I must say,” Trump said during a joint media address by the two leaders.
“India imposes 30-40 to 60 and even 70% tariffs on some of the goods, and in some cases far more than that. As an example, a 70% tariff on US cars going into India, which makes it pretty much impossible to sell those cars.”
In Union Budget 2025-26, India reduced the import tax on high-end motorcycles and cars, in what can be seen as a boost to Harley-Davidson Inc. and Tesla Inc. of the US. While the taxation on Harley-Davidson motorcycles has been a bone of contention in the past, New Delhi has laid out a red carpet of sorts for Tesla to make and sell in India.
On Thursday, before meeting US President Trump, PM Modi met with Tesla CEO Elon Musk in Washington DC, where they discussed “space, mobility, technology and innovation”.
Had a very good meeting with @elonmusk in Washington DC. We discussed various issues, including those he is passionate about such as space, mobility, technology and innovation. I talked about India’s efforts towards reform and furthering ‘Minimum Government, Maximum Governance.’ pic.twitter.com/7xNEqnxERZ
— Narendra Modi (@narendramodi) February 13, 2025
American Cars, Indian Parts
A direct fallout of the tariffs can be pricier American cars.
India’s auto-component makers supply to all American carmakers, including Tesla and Ford Motor Co. that is looking to reopen its factory in Chennai for exports from India. A few of them, like Motherson Group, already have manufacturing facilities in the US.
“Any hike in tariffs will make American cars more expensive. That too amid a sales slump,” Gupta of S&P Global Mobility said. “India anyway is the only alternative to China for US carmakers.”
At $6-7 billion every year, India makes up 2% of the $300-billion worth of auto components flowing into the US—the world’s largest automotive market, according to the Automotive Component Manufacturers Association of India, or ACMA.
Sansera, too, doesn’t see an immediate impact on its US business.
“In our case, I don’t think there will be too much of an impact in short- and medium-term, as vendor contracts are hard to replace or rework immediately,” said BR Preetham, executive director and group chief executive officer of Sansera. “But in the long-term, we will have to look at strategy for some value-addition and offset this risk.”
But there’s a bigger issue at hand, according to Preetham.
“The commodity in which we are present, which is metal precision machining components, the availability of skilled manpower in the US is becoming tougher day by day,” he said. “It’s not only tariffs…(that is a problem).”
. Read more on Auto by NDTV Profit.Heavy localisation, higher local sales, and minimal US exports limit Indian auto’s exposure to the US. India makes up 2% of total auto-component exports to the US. Read MoreAuto, Notifications
NDTV Profit
