U.S. President Donald Trump’s announcement to impose a steep 25% tariff on imported cars and auto parts will hit Tata Motors’ luxury car subsidiary Jaguar Land Rover the most and several auto component manufacturers, analysts said.
“The U.S. is not a significant export destination for India’s vehicle exports. However, Tata Motors could face an impact due to JLR, which derives over 30% of its sales volume from the U.S. market in 9MFY25,” said Mrunmayee Jogalekar, auto analyst, Asit C Mehta Investment Interrmediates Ltd.
“With no manufacturing facility in the U.S., all JLR vehicles will be subject to tariffs, which could impact pricing and profitability,” she said. Tata Motors shares on Thursday fell 5.56% to ₹668.60 on the BSE.
“For the Indian auto components industry, the U.S. remains a key export market, contributing 27% to total exports in FY24. Tariffs are expected on key components such as engine, transmission, powertrain, and electrical parts,” she said.
“This could have a greater impact on companies like Sona Comstar (43% revenue from North America) and Samvardhana Motherson (18% revenue contribution). However, most other component manufacturers have a well-diversified export presence, which could mitigate the overall impact,” she added.
According to Anuj Sethi, senior director, Crisil Ratings, the operating margins of Indian auto parts manufacturers-exporters will be hit by 1.25-1.5% (125-150 basis points) from the current 12–12.5% range, assuming full absorption of the tariffs.
“About a fifth of the revenue of India’s auto component sector is derived from exports. Of this, 27% is to the U.S. market alone,” Mr. Sethi said.
“India exported approximately 6.7 lakh vehicles in 2024, with exports now accounting for 15–16% of the total domestic automotive sales. When it comes to the U.S. specifically, the export exposure remains relatively limited,” said Naveen K.R., senior director, Windmill Capital.
“According to the United Nations COMTRADE database, India exported motor cars and vehicles worth just $37.11 million to the U.S. in 2023. Given this small share, the direct impact of U.S. tariff hikes on Indian automakers is expected to be limited,” he said.
MSMEs to be hit
Increase in tariff by the U.S. on its imports from the Indian auto industry by an additional 25%, on top of the existing 2-3%, will result in Indian exports facing a significant competitive disadvantage in the U.S. market, according to EEPC India.
The U.S. has proposed additional 25% tariff on imported cars and auto components from April 2. India exports close to $3 billion worth auto components in the engineering segment annually. The main components exported include chassis fitted with engines, electrical lighting/signalling equipment, and windscreens.
The EEPC India pointed out that the U.S. is however yet to publish detailed annexures or specific tariff lines, outlining the products within the auto and auto components industry that will come under the additional tariff. This lack of detailed information makes it challenging to assess fully the impact of these tariffs.
The proposed additional tariff on auto imports by the U.S. threatens to disrupt India’s growing auto component exports. Hence, a bilateral trade agreement stands out as the most practical strategy, offering a structured mechanism to secure market access while shielding India’s domestic industry from adverse global competition, it said.
Automobile component exporters in Coimbatore said the tariff, if implemented, will have a significant impact on the suppliers in India and one of the exporters said the US buyers are also waiting to see the product lines that will come under the additional tariff.
Published – March 27, 2025 09:47 pm IST
