India’s automotive industry, especially the component manufacturers, may breathe a sigh of relief as the US President Donald Trump on Monday suggested that he might temporarily exempt the auto industry from tariffs he previously imposed on the sector, to give carmakers time to adjust their supply chains.
Investors also welcomed the development as shares of Tata Motors, Samvardhana Motherson and Sona BLW gained up to 8% on Tuesday.
The Trump Administration had last month announced a 25% tariff on imports of automobiles and some components. The new tariffs will apply from April 3, 2025, on imports of passenger vehicles (PVs), and light trucks and a date to be announced but not later than May 3, 2025 on components such as engines, transmissions, powertrain parts and electricals.
“The fresh comment by the US President is encouraging as he realises the impact of the hastily implemented tariff. Besides its impact on our revenue, it would have led to a sharp increase in vehicle prices in the US and created other inflationary challenges,” said a senior executive of a leading auto component company.
India’s share of auto component exports to the US is significant at 28%. Within this, powertrain parts, transmissions, engines, and electricals account for 40%, 29%, 13% and 2%, respectively. As the PV exports from India to the US represent less than 1% of the total PV exports, the tariff imposition of the tariff does not have any material impact on the Automotive OEMs.
However, this is expected to have an impact on Tata Motors’ Jaguar Land Rover (exported from the UK), which derives 33% of its sales from North America.