Ind-Ra highlights that exports of components outside section 232 to the replacement market could face a higher impact
India Ratings and Research (Ind-Ra) opines the US tariffs have added complexity to India’s auto component industry, which has been expanding globally, with the US as a key export destination. While components covered under section 232, largely supplied to passenger vehicles and light trucks, are shielded due to uniformity of tariff across nations, the remaining components are exposed to vulnerability as the tariffs’ full effects unfold.
In a report, Ind-Ra highlights that exports of components outside section 232 to the replacement market could face a higher impact, while the effect on supplies to original equipment manufacturers (OEMs) could be more gradual. In the medium term, auto component manufacturers could establish their manufacturing base in proximity to the US where the tariffs are lower, though the same could pressure overall margins.
“The newly imposed US tariffs could disrupt the growth momentum of India’s auto component exporters. While items under Section 232 may remain unaffected, the industry faces pricing pressure and margin risks for others as the heightened tariffs have eroded India’s competitive advantage,” states Shruti Saboo, Director, Corporates, Ind-Ra.
The US is the largest export market for India’s auto components, accounting for around 27 per cent of the total exports, exposing 8 per cent of the domestic auto component industry’s revenue. Exports to the US grew at a compounded annual growth rate (CAGR) of nearly 11 per cent over the financial year 2018 to 2024, compared to 8 per cent for overall exports, the report adds.
Ind-Ra notes that in the domestic market, the auto component industry benefits from vehicle premiumisation, technology-enabled features, regulatory changes as well as thrust of OEMs to source locally. However, exports have been margin-accretive business. With subdued demand from Europe and uncertainties around US exports, ancillaries’ margins could be impacted in the near to medium term.
