Increased U.S. tariffs are showing a stronger bias towards affecting the automotive and tire industries in India compared to their counterparts in Asia.
Published on August 2, 2025
The United States has imposed a 25% tariff on all goods coming from India, effective from August 7, affecting the country's automotive and tyre industries, which have substantial export exposure to the US market.
The auto components industry reported a turnover of $80.2 billion for FY2025, showing a growth of around 10% compared to FY2024. However, the growth in the auto components industry is not specified to be directly affected by the US tariff.
The US tariff places Indian manufacturers at a disadvantage compared to Asian peers like Japan, Vietnam, and Indonesia, which face lower or preferential duties. The higher tariff erodes India's cost advantage, potentially reducing India’s exports to the US by impacting nearly 27% of its auto component exports valued at $9.5 billion in FY2025.
Tyre manufacturers are similarly affected by this tariff bias, placing them at a further disadvantage relative to these Asian peers. Projected export impacts suggest India’s overall goods exports to the US might decrease by about 30% in FY2026 due to the tariff, with sectors like petroleum, pharmaceuticals, electronics, and engineering goods also hit.
Auto component exporters, heavily reliant on the US market, are planning to diversify their geographies to lessen the impact of the tariff. Southeast Asian nations have lower tariff rates compared to India, potentially offsetting the advantage Indian tyre exporters previously held over Chinese competitors.
Icra, a rating firm, has expressed concerns about the impact of the tariff on India's domestic auto component industry and tyre makers. The article does not provide information about the impact of the tariff on the leather, textiles, or shrimp industries.
It is worth noting that the US accounts for 27% of India's auto component exports and 17% of tyre exports. The article does not mention any specific companies in the auto components industry that are planning to diversify their geographies.
A separate mention in the article is the Initial Public Offering (IPO) of ARCIL, a company, comprising an Offer for Sale (OFS) by Avenue India Resurgence, SBI, and other investors. This fact does not directly relate to the tariff issue.
In summary, the 25% tariff imposes a steeper cost penalty on Indian auto component and tyre exports than on exports from Japan, Vietnam, and Indonesia, likely leading to loss of market share and declining export volumes in the near term.
- The automotive industry and tyre manufacturers in India face a significant disadvantage due to the 25% tariff imposed by the US, which could potentially reduce India’s exports to the US by impacting nearly 27% of its auto component exports.
- The higher tariff erodes India’s cost advantage, affecting various sectors like petroleum, pharmaceuticals, electronics, and engineering goods, potentially resulting in a 30% decrease in overall goods exports to the US in FY2026.
- Auto component exporters, heavily reliant on the US market, are planning to diversify their geographies to lessen the impact of the tariff, particularly targeting Southeast Asian nations with lower tariff rates.
- Icra, a rating firm, has expressed concerns about the impact of the tariff on India's domestic auto component industry and tyre makers, but there is no information available regarding the leather, textiles, or shrimp industries.
- Despite the tariff issue, an Initial Public Offering (IPO) of ARCIL, a company, comprising an Offer for Sale (OFS) by Avenue India Resurgence, SBI, and other investors, was mentioned separately in the article, which does not directly relate to the tariff issue.
