US Tariffs Threaten Indian Auto Component Exporters with Rs 4,500 Crore Profit Hit

Indian auto parts exporters are facing a tough road ahead, with new US tariffs threatening to wipe out Rs 2,700–4,500 crore in profits, according to a report by credit rating agency ICRA. Starting May 3, 2025, a 25% import duty will hit key auto components like engines, transmissions, powertrains, and electrical parts, which make up about 65% of India’s auto parts exports to the US.

The US is a major market for Indian auto parts, contributing 8% of the industry’s revenue in FY24. Exports to the US have been growing steadily, up 15% annually from FY20 to FY24. But the new tariffs, on top of an existing 25% duty on steel and aluminum used in auto parts, could add Rs 9,000 crore in costs to the supply chain. Indian exporters might have to absorb 30–50% of these costs, cutting their operating profits by 10–15%. Overall, the industry could see a 3–6% profit drop, ICRA predicts.

These tariffs are expected to slow the industry’s growth to 6–8% in FY26, down from an earlier estimate of 8–10%, with US exports likely to fall by mid-to-high single digits. Profit margins could shrink by 50–100 basis points across the industry, and exporters could face an even steeper 150–250 basis point hit. Thankfully, most exporters have stable finances, with over 70% of their revenue coming from domestic sales.

Industry experts are hopeful but realistic. “Suppliers are negotiating to pass on costs, but success depends on their market leverage and product complexity,” said Shamsher Dewan, Senior Vice President at ICRA. Firms like Samvardhana Motherson and Bharat Forge, with US-based plants, are less exposed. Looking ahead, Indian exporters might gain an edge over Chinese competitors if US tariffs on China continue, as some are already seeing more US inquiries.

The Automotive Component Manufacturers Association of India is banking on India-US trade talks to find a fair solution. In the meantime, exporters are exploring cost-cutting measures and new markets to soften the blow.