India's auto parts sector might encounter short-term challenges after U.S. President Donald Trump declared a 25% standard tariff on car imports. The action is anticipated to raise expenses for Indian manufacturers of powertrains, engine components, and transmission systems, which collectively represent a considerable share of India’s $6.79 billion exports to the U.S. in FY24.
Industry sources informed Business Today that although Indian auto parts have traditionally enjoyed a price edge over Chinese and European suppliers, this new duty might reduce demand from U.S. automakers.
A recent cost evaluation by ACMA and BCG revealed that Indian components were already 20-25% less expensive than Chinese parts in the U.S. market, due to tariffs imposed on China. Furthermore, in Germany, where suppliers from Eastern Europe prevail, Indian goods were discovered to be as much as 15% less expensive because of reduced labor and energy expenses.
Although the effect on total exports might not be instantaneous, worries persist regarding possible tariff exemptions for certain countries such as Mexico and China, which could lead to an unbalanced competitive environment for Indian producers. Additionally, there is an increasing danger of China employing unclear subsidies to lower global prices, although Washington is anticipated to carefully observe these actions.
Sources indicate that in spite of these obstacles, the Indian auto parts sector, which exported $21.2 billion worldwide in FY24, continues to be diverse and robust. Producers might investigate cost-saving measures, different supply chain approaches, or even increasing output in essential international markets to lessen the effects.
In the meantime, the Indian government is vigilantly observing trade progress and is likely to advocate for more equitable market access in forthcoming trade talks with the U.S
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