NEW DELHI: The much-hyped 25 per cent hike in auto tariffs with regard to completely built vehicles (CBUs) and auto parts by US President Donald Trump is turning out to be more bark than bite for India’s auto industry, according to think tank Global Trade Research Initiative (GTRI).
With the new auto tariffs set to take effect on April 3, concerns loomed over their impact on Indian auto exports. However, GTRI’s analysis suggests that the fuss may be overblown.
India’s passenger car exports to the US in 2024 were a mere $8.9 million – just 0.13 per cent of the country’s total exports of $6.98 billion. Similarly, truck exports stood at $12.5 million, accounting for just 0.89 per cent of India’s global truck exports.
Even in the case of car chassis fitted with engines, where the US made up 11.4 per cent of India’s global exports, the numbers remain modest.
The only segment that warrants closer attention is auto parts, where the US accounted for $2.2 billion (29.1 per cent) of India’s total exports in this category. While this might seem concerning, GTRI founder Ajay Srivastava pointed out that all major exporting countries – Mexico ($36 billion), China ($10.1 billion), and India ($2.2 billion) – will face the same tariffs, ensuring a level playing field.
Maybe a blessing in disguse
Rather than a setback, the development could even work in India’s favour. Given India’s competitive advantage in labour-intensive manufacturing and its relatively lower import tariffs (ranging from zero to 7.5 per cent), the country may actually gain market share in the US over time.
“India should avoid knee-jerk reactions or tariff reductions, as seen in Australia, where slashing import duties from 45 per cent to 5 per cent in the late 1980s led to the collapse of its domestic auto industry,” Srivastava cautioned.
With minimal direct exposure and a potential upside in auto parts, the tariffs appear to be more noise than substance. For India, this could well be a storm in a teacup.
