MUMBAI: The 50% tariffs that the US slapped on Indian shipments will crimp at least 8% of the auto component output this fiscal, as the American market is the single largest source of revenue for exporters from this industry, says a report.
In a report, analysts at Icra Ratings said Wednesday that the high US tariffs are expected to affect close to 8% of the country’s overall auto component production.
Auto component makers net more than 27% of their revenue from the US alone, while their total export dependence is higher at 30%. But given the 25% reciprocal duties effective August 7 and an punitive 25% additional duties (for buying Russian oil) from August 27 and the applicable countervailing and ad valorem duties come to 58%, leaving domestic exporters at a high disadvantage to their Asian peers from China, Japan, Vietnam, and Indonesia who face much lower tariffs of 15–30%.
Auto component exports contribute nearly 30% to the industry's revenue, with the US alone accounting for 27% of this share, the report said, adding "as a result, close to 8% of our overall auto components production is expected to be directly affected by the US tariffs."
Exports of auto components to the US have been rising steadily, moving from $4.1 billion in FY21 to $6 billion in FY22, further rising to $6.5 billion in FY23, $6.8 billion in FY24, and are estimated to reach $7.3 billion in FY25, the report said.
Further, manufacturers in Mexico and Canada remain exempt under the US-Mexico-Canada agreement, further intensifying competitive pressures on our exporters, it added.
Geography-wise, exports comprise 29% of the country's auto component industry, with domestic sales accounting for 56% and replacement demand for 15%, Icra said. Within exports, Europe accounts for 30%, the US comes in at 27%, Asia 26%, Latin America 3%, and other regions 13%, the report concluded.