August 3, 2025

The US has enacted a substantial 25 percent tariff on goods imported from India, a move that has serious implications for the Indian auto component and tyre industries. This tariff, effective from August 7, threatens the competitiveness of Indian manufacturers as they now face significant disadvantages in comparison to their counterparts in countries like Japan, Vietnam, and Indonesia, which benefit from lower or preferential duties. According to a report from Icra, a prominent rating firm, this tariff hike raises serious concerns for both the automotive and tyre sectors in India, industries that already possess considerable export exposure to the US market. The US market is pivotal for Indian manufacturers as it accounts for a noteworthy 27 percent of India’s auto component exports and 17 percent of tyre exports. Hence, the new tariff puts Indian exporters in a challenging position. As the automotive industry in India has been on a growth trajectory—with a reported turnover of USD 80.2 billion (approximately Rs 6.73 lakh crore) for FY2025, marking a growth of around 10 percent from FY2024—it becomes crucial for manufacturers to navigate these changing trade dynamics effectively. The auto component exporters specifically, who depend heavily on the US market, are now at risk of losing their edge. Previously, Indian tyre exporters experienced a competitive advantage over Chinese firms; however, the tariffs could mitigate this benefit due to more favorable rates granted to other Southeast Asian nations. In light of these challenges, Indian auto component exporters are being urged to assess their reliance on the US market. Many will likely look to diversify their market reach to minimize risk and exposure to potential losses from the high tariffs. This means exploring new markets and potentially shifting their export strategies to bolster their business resilience. Furthermore, the focus will also be on enhancing cost efficiencies, allowing Indian manufacturers to remain competitive even under the strain of increased tariffs. While the intent of the US tariffs may be to encourage domestic production, the repercussions for Indian firms could lead to increased costs, pricing issues, and market share losses. Current trends suggest that those manufacturers who can reduce operational costs and pivot to alternative markets may sustain their business viability in the longer term. The auto components sector is facing unprecedented challenges due to global trade dynamics, underscoring the importance of strategic planning and adaptability in an evolving economic landscape. With tariffs reshaping the competitive landscape, Indian auto components and tyre manufacturers must respond proactively to secure their future in the international market.

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Tags: Us tariffs, Indian auto industry, Tyre industry, Import duties, Export challenges,