Indian Auto Component Makers Largely Unaffected by Latest US Tariffs — Here’s Why

Despite the waves caused globally by the latest round of tariffs announced by President Donald Trump, Indian auto component manufacturers are unlikely to feel a major pinch—especially those operating out of Canada and Mexico. Thanks to existing trade protections and agreements, many of these companies remain largely insulated from the immediate impact of the new duties.

Let’s take a closer look at how the new ‘Liberation Day’ tariffs are structured, why Indian firms are in a relatively safe spot, and what lies ahead for the future of India’s automotive and EV exports to the United States.

Overview of the ‘Liberation Day’ Tariffs

The newly introduced tariffs, referred to as the ‘Liberation Day’ tariffs, are part of the US government’s efforts to reshape its international trade relationships and protect domestic manufacturing. However, these tariffs come with key exemptions, particularly for goods coming from Canada and Mexico.

Key Highlights of the New Tariff Policy

• The tariffs do not apply to imports of autos, auto parts, steel, or aluminum from countries like Canada and Mexico.

• Canada and Mexico are exempted under the International Emergency Economic Powers Act (IEEPA), ensuring continued smooth trade.

• Goods that comply with the United States-Mexico-Canada Agreement (USMCA) will continue to enter the US duty-free.

• However, non-compliant imports from other countries will face a 25% tariff.

• Tariff implementation timeline:

  • Passenger vehicles: Duties begin on April 3, 2025

  • Critical auto parts: Tariffs enforced no later than May 3, 2025

Impact on Indian Auto Component Manufacturers

Indian manufacturers, especially prominent ones like Samvardhana Motherson International Ltd, have responded to the new tariffs with cautious optimism. According to company representatives, most of their exports to the US are routed through facilities in Canada and Mexico, and they already meet USMCA compliance standards.

Manufacturer Perspective

“Our North American operations are strategically structured to meet USMCA standards, and we foresee no immediate disruption in our export flows to the United States,”
— A spokesperson from Samvardhana Motherson International Ltd.

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This strategic alignment offers a critical cushion against the effects of newly imposed duties and offers Indian exporters more breathing room compared to their counterparts in non-USMCA nations.

India-US Auto Component Trade Snapshot

Here is a quick look at the trade relationship between India and the US when it comes to auto components:

These numbers indicate that while the US is a key market, India’s overall export dependency remains relatively low, especially when compared with global players like China.

Why the Impact on India’s Auto Sector Is Likely Minimal

Despite the intimidating headlines, the latest US tariffs are unlikely to shake the foundation of India’s auto export sector. Here’s why:

Limited Dependency on the US Market

• Only 28% of India’s auto component exports go to the United States.

• Within this 28%, 84% consists of powertrains, transmissions, engines, and electrical components, which are not heavily targeted by the new tariff list.

• India’s overall auto production exports only 15% of its total output, with just 4.2% going directly to the US.

• After adjusting for the actual categories of goods affected, the total tariff-exposed revenue for Indian manufacturers drops to around 3.5%.

Strategic USMCA Advantage

Indian companies with manufacturing setups in Canada and Mexico benefit from USMCA’s zero-duty policy, giving them a trade advantage over competitors from non-USMCA countries.

Competitive Pressures and Emerging Risks

While Indian manufacturers are relatively safe for now, competitive pressure remains a challenge.

Shift in Global Trade Dynamics

• Countries like Mexico and Canada, being part of USMCA, are in a stronger position to capitalize on the duty-free corridor.

• Together, these two countries account for nearly 46% of the US’s auto component imports.

• This could potentially erode the price competitiveness of Indian exporters if they do not adjust by moving more production closer to the US or cutting operational costs.

Case Study: Brands That May See a Shift – Jaguar Land Rover and Royal Enfield

While auto component manufacturers are mostly unaffected, OEMs (original equipment manufacturers) like Jaguar Land Rover (JLR) and Royal Enfield might have to recalibrate their strategies depending on future policy shifts.

Jaguar Land Rover (JLR)

• The US accounts for 23% of JLR’s global sales (more than 400,000 vehicles).

• JLR exports its vehicles from the United Kingdom, which is not exempt under the new tariff rules.

• Potential options include:

  • Absorbing increased costs internally

  • Passing costs on to US consumers (which could hurt demand)

  • Cutting production or operational expenses

  • Exploring US-based manufacturing to circumvent duties

Royal Enfield

• Holds around 8% market share in the US mid-size motorcycle segment.

• While tariff increases could slow export growth, its flagship Super Meteor 650 remains competitively priced:

  • Super Meteor 650: $7,999

  • Harley-Davidson Iron 883: $9,999

• The price gap allows Royal Enfield to maintain a strong value proposition, even in a potentially tariff-inflated market.

A New Window of Opportunity: Electric Vehicles (EVs)

If there’s one area where Indian auto manufacturers can truly seize the moment, it’s the electric vehicle (EV) segment.

As US tariffs make traditional auto imports costlier, budget-friendly electric vehicles from India have a real chance to carve out market space. Indian EV makers are already exploring this niche with offerings tailored for affordability and efficiency.

“With US automotive tariffs rising, India’s electric vehicle sector has a prime opportunity to capture a larger share of the US market, especially in the budget car segment.”
— Saurabh Agarwal, EY Partner & Automotive Tax Leader

EV Export Potential: A Quick Comparison

This gap highlights the massive potential for Indian EV and component manufacturers to grow their footprint in the US, particularly in a post-tariff market that favors innovation and affordability.

Final Thoughts

While the new US tariffs may rattle global trade nerves, Indian auto component manufacturers are, for the most part, well-positioned to navigate the storm. Their strategic alignment with USMCA regulations, limited direct exposure to the US market, and increasing interest in electric vehicle exports ensure that the immediate fallout is minimal.

That said, Indian manufacturers should not grow complacent. Rising costs, competitive pressures from USMCA partners, and evolving trade dynamics may necessitate proactive strategies such as:

• Shifting more production to North America

• Increasing R&D investments in electric vehicles

• Building supply chain resilience

• Exploring local assembly or partnerships in the US

Frequently Asked Questions (FAQs)

1. Will Indian auto component exporters be impacted by the new US tariffs?
Not significantly. Most of India’s auto exports to the US either comply with USMCA standards or are exported from tariff-exempt regions like Canada and Mexico.

2. What types of auto parts does India export the most to the US?
India mainly exports powertrain components, engines, transmissions, and electrical systems, which currently remain outside the direct scope of the new tariffs.

3. Could these tariffs influence India’s long-term automotive export strategy?
Yes. Indian firms may look to diversify export markets, increase production in USMCA countries, or boost domestic EV innovation to stay competitive.

4. Are electric vehicles from India likely to benefit from these trade changes?
Absolutely. With rising tariffs on traditional imports, cost-effective EVs from India could find a receptive market in the US, especially among price-conscious consumers.

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