Mexico’s decision to raise import duties on Indian exports has raised multiple concerns, especially for the auto sector. Mexico is India’s third-largest car export market after South Africa and Saudi Arabia. The annual auto shipment to Mexico amounts to nearly $1.87 billion.
Mexico President Claudia Sheinbaum’s government has approved higher tariffs for hundreds of products from countries that do not have trade agreements with Mexico, including India and China, starting next year.
With this move, the import duty on cars will jump to 50% from 20%, affecting automakers such as Volkswagen, Hyundai, Nissan and Maruti Suzuki.
India’s auto exports to Mexico
India exported $5.3 billion worth of goods to Mexico in 2023–24, with vehicles remaining India’s top export at $1.7 billion. Machinery, electrical equipment, organic chemicals and aluminium also feature among the major export categories.
Skoda Auto accounted for almost half of all India-made cars shipped to Mexico. Hyundai exported vehicles worth $200 million, Nissan $140 million, and Maruti Suzuki $120 million, according to Reuters.
According to CII, bilateral trade between India and Mexico stood at $8.4 billion in 2023–24, with imports valued at $3.1 billion. Mineral fuels make up India’s largest import from Mexico at $1.87 billion.
The tariff increase comes at a time when India is already dealing with 50% duties imposed by the US on several products.
Industry warns of risk to India’s manufacturing ambitions
According to Reuters, the tariff increase went through despite industry bodies lobbying New Delhi to prevent it.
The Society of Indian Automobile Manufacturers (SIAM) urged the commerce ministry in November to ask Mexico to “maintain status quo” on tariffs for vehicles shipped from India.
“The proposed tariff hike is expected to have a direct impact on Indian automobile exports to Mexico… we seek Government of India’s support to kindly engage with the Mexican government,” SIAM wrote in its letter, according to Reuters.
Car makers in India also depend on exports to maximise production and maintain economies of scale. Exports also help cushion weaker domestic demand and support profitability. The new duty may force several companies to rethink their strategy.
Automakers express concern over major export market
Piyush Arora, managing director of Skoda Auto Volkswagen India, highlighted the importance of Mexico as an export hub, as per a report by Reuters.
“India has been a strong export base for many years and the company ships to more than 40 countries from here. Mexico has consistently been one of our important export markets, given the rising demand there and the traction of our India-made models,” he said before the tariff approval, according to Reuters.
Automakers told government officials that most cars exported from India to Mexico are compact models with engines under one litre, designed specifically for the Mexican market and not meant for the US.
“Indian-origin vehicles are not a threat to Mexican local industry as Indian vehicles do not cater to high-end segments manufactured by Mexico for serving the North American market,” SIAM said in its letter, according to Reuters.
Manufacturers also pointed out that Mexico sells around 1.5 million passenger vehicles a year, with two-thirds imported. India’s share in total sales is “just about 6.7%,” according to Reuters.
