Indian auto component makers, which are facing an additional 25% tariff for exports to the US, are seeing a silver lining in the dark clouds. Some of them believe the universal tariff will help them undercut their Chinese competitors – the third-largest suppliers in the American market.
Under the new tariff regime — applied on top of existing duties and fees —the minimum levy on Chinese auto parts will jump from 12.5% to at least 37.5%, with the highest duty reaching as high as 62.5%, while the levy on Indian parts will be capped at 30%.
According to the US department of commerce, Indian components in US imports totalled $3.1 billion in FY24, having a modest share of 1.6% in the $197.3-billion market. Whereas, Chinese parts dominated with $18.3 billion, capturing 9.3% of the market. While the US department of commerce data recorded $3.1 billion in imports from India, the Automotive Component Manufacturers Association of India (ACMA) reported that India exported $5.72 billion worth of auto parts to the US in FY24. Sector experts suggest that the discrepancy may stem from differences in calculation methods.
Automobile component industry executives say that the tariff gap creates a significant opportunity for exporters to expand their market share and tip the competitive balance in their favour. “Despite the looming 25% tariff, India remains a compelling option for US buyers, with its auto parts still priced at least 10% lower. This cost advantage not only appeals to US companies but it also supports their efforts to diversify supply chains away from China,” an industry executive said.
According to a recent White House order, the additional 25% tariff vehicles will come into effect on April 2 and on auto parts before May 3.
Tariff rates on automobile parts imported from India are determined on a product-by-product basis under the US Most Favoured Nation (MFN) system. In general, Indian auto parts face tariff rates ranging from 0% to about 5%, with an average rate of 2.5%. In contrast, after Trump imposed a 10% duty on all Chinese imports in February, the minimum tariff on Chinese auto parts jumped to 12%.
The Indian automobile parts industry has been pushing for a near-zero duty deal under the proposed US-India Bilateral Trade Agreement (BTA), aiming to become the most attractive source for US imports.
Currently, Mexico and Canada dominate as suppliers under the United States-Mexico-Canada Agreement (USMCA), which grants tariff-free access to vehicles and components that meet strict rules of origin. In contrast, non-compliant vehicles and parts are subject to MFN tariffs ranging from 0% to 5.5%, with commercial vehicles facing tariffs as high as 25%.
