US Tariffs Hit Indian Auto, Tyre Sectors Harder Than Asian Rivals
India’s auto industry faces tariff disadvantage!
The United States’ imposition of a 25% tariff on Indian exports, effective August 7, has placed India’s $111 billion auto component and tyre industries at a significant competitive disadvantage compared to Asian peers like Japan, Vietnam, and Indonesia, according to rating agency Icra. These countries face lower tariffs of 15%, 20%, and 19%, respectively, giving them an edge in the critical US market.
The US accounts for 27% of India’s auto component exports, valued at $9.5 billion in FY2025, and 17% of tyre exports. The tariff hike threatens the pricing strategies of Indian manufacturers, particularly in off-highway and replacement tyre segments and various auto components, Icra noted. While Indian tyre exporters previously held a slight advantage over Chinese competitors, who now face a 30% tariff, this is offset by the preferential rates granted to Southeast Asian nations.
India’s auto component sector, which grew 10% to $80.2 billion in FY2025, and exports, up 8% to $22.9 billion, faces immediate challenges. Suppliers heavily reliant on the US market, especially micro, small, and medium enterprises (MSMEs), are likely to see reduced competitiveness. Experts suggest Indian firms must diversify export markets, targeting regions like Europe and the UAE with favorable trade agreements, and enhance cost efficiencies to mitigate losses.
Also Read: SJM Condemns US Tariffs, Urges India to Stay Resolute
Saurabh Agarwal from EY India sees potential in the electric vehicle segment, urging government enhancements to the Production-Linked Incentive (PLI) scheme to boost competitiveness. Meanwhile, some Indian manufacturers are exploring investments in tariff-neutral zones like Mexico to maintain US market access. As trade talks continue, with a sixth round slated for August-end, the industry braces for short-term disruptions while seeking long-term strategies to navigate the tariff landscape.
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