Impact of US Tariffs on Indian Auto Component Exporters

The automotive component sector in India is bracing for significant challenges following the implementation of new US tariffs. According to the Investment Information and Credit Rating Agency (ICRA), these tariffs could slash operating profits by Rs 2,700–4,500 crore, affecting 10–15% of component exporters' operating profits.

Forecasts and Projections: ICRA anticipates a moderation in revenue growth for the sector to 6–8% in FY2026, down from earlier projections of 8–10%. This adjustment is largely due to expected declines in US exports, spurred by the steep hike in import duties.

Challenges and Opportunities Ahead

Despite the looming margin contractions and heightened working capital needs, ICRA believes that most exporters will maintain stable debt metrics and liquidity. Shamsher Dewan of ICRA highlights the potential for cost pass-through but notes the variability based on several factors including supplier criticality and competition.

Amidst these challenges, there's a silver lining as Indian manufacturers report increased inquiries from US importers, signaling potential new business avenues. Furthermore, India's strategic positioning could offer a medium-term advantage, especially if it enhances cost competitiveness relative to China.

Looking Forward: Trade Talks and Market Access

As US-India trade talks loom, India is poised to request relaxed export controls and better access to advanced technologies under a proposed bilateral trade agreement. This move aims to mirror benefits granted to other US strategic partners and could open new doors for Indian exports in critical sectors.