US tariffs unlikely to have any material impact on India`s passenger vehicle exports: ICRA
ICRA has stated that the US administration’s latest tariff measures will not have any material impact on India's passenger vehicle exports due to meagre volumes of such shipments. As part of reciprocal tariffs on about 60 countries to counter higher duties on American products imposed globally, US President Donald Trump had announced 27 per cent reciprocal tariffs on India, saying India imposes high import duties on American goods. Although the automobile sector is not covered in this order since it is already subject to Section 232 tariffs at 25 per cent, announced by the Trump administration on March 26, 2025. Meanwhile, the rating agency has suggested that the recent tariff imposition is unlikely to have any material impact on automotive original equipment makers as the passenger vehicle exports from India to the USA represent less than 1 per cent of the overall PV exports.
However, the ICRA has indicated that the scenario is different for auto components as the key auto parts, including engines, transmissions, powertrain components and electrical parts face increased tariffs in the US subsequent to 25% tariff imposition on all aluminium and steel imports. It added that the effective date is pending but is expected to be not later than May 3 this year. As per the rating agency, the Indian auto components exports accounted for around 29 per cent of the industry's total revenues in FY24, of which around 27 per cent was to the US.
ICRA added that while the situation is evolving, the recent tariff related development and the consequent inflationary pressures and slowdown in demand in the US could have a negative impact on revenue and earnings for component exporters (in the affected product categories) over the next few months. However, the rating agency suggest that the recent development could create long term opportunities for the Indian exporters as higher tariffs are being levied on other competing nations as well. It added that the exporters dependent on the US market are also trying to diversify their revenue base across other geographies (including Asia), meanwhile, measures to improve value addition, diversification into non-auto segments and cost-optimisation strategies are also being worked upon to reduce the potential impact on margins.
