Limited US Exports Will Protect Revenue of Indian Auto Parts Manufacturers: Crisil
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Synopsis
A Crisil report reveals that India's auto component exports to the US are limited, shielding revenues for local manufacturers. The tariffs imposed by the Trump Administration are unlikely to significantly impact the Indian auto industry.
Key Takeaways
- Indian automotive production exports are only 15 percent.
- Exposure to the US market is minimal at 4.2 percent.
- The new US tariffs will further limit this exposure.
- Majority of Indian exports go to Middle Eastern and Latin American countries.
- Overall impact of tariffs on OEMs in India is minimal.
New Delhi, April 1 (NationPress) The percentage of exports in India’s automotive production is merely 15 percent, indicating that the domestic component manufacturers' exposure to the US market is limited at 4.2 percent. This scenario serves as a protective barrier for the revenue of component producers in the country, as noted in a report from Crisil Intelligence published on Tuesday.
As per the report, when considering the components subjected to tariffs, the exposure of Indian firms is expected to decrease further to 3.5 percent of the yearly revenue from auto components, thereby mitigating the overall impact.
“This restricted export scenario to the US will safeguard the revenues of component manufacturers,” the report highlighted.
The administration under Donald Trump in the US has imposed a 25 percent tariff on the import of automobiles and certain components to bolster its domestic industry, supply chains, and national security.
These new tariffs will take effect on April 3 for imports of passenger vehicles (PVs) and light trucks, with a date yet to be specified but no later than May 3, 2025, for components including engines, transmissions, powertrain parts, and electrical systems.
In the fiscal year 2024, India's exports of PVs and commercial vehicles (CVs) represented 15 percent and 8 percent of total production, respectively, with the share of US imports being relatively insignificant at 0.21 percent and 3 percent for these categories.
The predominant destinations for Indian passenger cars and light trucks are the Middle East, Africa, and Latin America, including countries such as Saudi Arabia, UAE, South Africa, Mexico, and Chile.
“Following the departure of General Motors and Ford from India, no major US automotive manufacturer has established a manufacturing base in India for exports back to their home country. Given the trivial share of India’s exports of PVs and CVs to the US, the imposed tariffs are likely to have a minimal effect on original equipment manufacturers (OEMs) in India,” the report stated.
India's share of auto component exports to the US remains significant at 28 percent.
Among these, powertrain parts, transmissions, engines, and electrical systems constitute 40 percent, 29 percent, 13 percent, and 2 percent, respectively. Collectively, these categories make up 84 percent of all automotive component exports from India to the US.
However, a potential decline in the competitiveness of domestic component manufacturers due to rising prices in the US market might have implications, as mentioned in the report.
This impact on India and other nations could consequently benefit Mexico and Canada, which are included under the USMCA and account for 46 percent of total imports into the US, the report added.
