The Trump Administration's recent decision to impose a 25% tariff on automobile and component imports, will have minimal impact on Indian original equipment manufacturers (OEMs) and limited effect on the auto component sector, according to a Crisil report.
Indian exports of passenger vehicles (PVs) and commercial vehicles (CVs) to the US account for a negligible share, with no major US automaker maintaining an Indian manufacturing base after the exit of General Motors and Ford from the country.
However, India's auto component exports to the US stand at a significant 28%, dominated by powertrain parts, transmissions, engines, and electricals, which collectively constitute around 84% of all automotive component exports. Despite this, domestic exposure remains limited to 4.2% of India’s automotive production, which further reduces to 3.5% for components under tariffs.
Crisil notes that limited exports to the US will safeguard revenue for Indian component manufacturers. However, higher prices in the US could affect competitiveness, potentially benefiting Mexico and Canada, which account for 46% of US auto imports under the United States-Mexico-Canada Agreement (USMCA).
The tariffs aim to protect US industry, supply chains, and national security. Imports from Mexico and Canada will receive preferential treatment, remaining tariff-free until procedures for selective application to non-US components are established.