India’s passenger vehicle (PV) exports are unlikely to be materially affected by the recent round of US tariffs, according to credit ratings agency ICRA. This assessment follows US President Donald Trump’s announcement of reciprocal tariffs on 60 countries, including a 27% levy on Indian goods, to counter what he described as unfair trade practices.
Despite the headline figure, the automobile sector remains outside the purview of these specific tariffs, as it is already covered under the earlier-imposed Section 232 tariffs at 25%. The new tariffs will impact imports of passenger vehicles and light trucks, but India’s exports to the US in this category are too small to significantly alter the industry outlook.
PV Exports to the US Minimal
“Passenger vehicle exports from India to the USA represent less than 1% of India’s overall PV exports,” said Srikumar Krishnamurthy, Senior Vice President and Co-Group Head for Corporate Ratings at ICRA Limited. “As a result, the tariff imposition does not have any material impact on the automotive original equipment manufacturers,” he added.
Auto Component Exports May Be at Risk
However, the story is different for India’s auto component exports. On March 12, the US imposed a 25% tariff on all aluminium and steel imports. This includes core auto parts such as engines, transmissions, powertrain components, and electrical parts. While the effective date is expected no later than May 3, this could impact Indian auto part exports significantly.
Also read: Indian IT Faces Heat Over US Tariff Shock
Auto components make up 29% of India’s auto industry revenues, with 27% of that going to the US market. “The recent tariff developments, coupled with inflationary pressures and slowing US demand, could negatively impact revenue and earnings for component exporters in the coming months,” Krishnamurthy warned.
Strategic Shifts Underway
Despite these challenges, ICRA notes that Indian exporters are preparing for the long term. With similar tariffs imposed on competing countries, Indian firms may eventually find new opportunities to expand their market share. Exporters are also exploring geographical diversification beyond the US and shifting towards non-auto segments, while adopting cost-optimisation strategies to preserve margins.
