With the US imposing reciprocal tariffs from April 2, India’s auto sector is pushing for a gradual reduction in import duties rather than an abrupt shift to a zero-duty regime. Industry bodies are drafting proposals to safeguard local manufacturers while aligning with global trade policies.
Auto Industry Calls for Staggered Tariff Reduction
As the US prepares to enforce reciprocal tariffs from April 2, India’s automotive industry is advocating for a phased reduction in import duties, rather than an immediate transition to a zero-duty structure. The move aims to cushion domestic manufacturers from heightened global competition while ensuring compliance with international trade norms.
The industry has urged key bodies like the Society of Indian Automobile Manufacturers (SIAM) and the Automotive Component Manufacturers Association (ACMA) to draft a gradual duty reduction proposal. This would provide local businesses with adequate time to adjust, minimizing any sudden disruptions in market dynamics.
“It is clear that tariffs will eventually be removed, but a phased approach would be more beneficial than an abrupt change,” said an anonymous automotive component manufacturer.
A formal response from SIAM and ACMA is awaited, but insiders suggest that multiple proposals are being prepared for submission to the government.
Impact on Auto Component Industry
The proposed duty cuts are expected to affect India’s auto component industry more than car manufacturers. While India’s trade in fully-built vehicles with the US is minimal, the country exports a significant volume of auto components to North America.
According to ACMA data, in FY24, India exported auto components worth $21.2 billion, with 32% (around $6.79 billion) directed toward North America, primarily the US.
Meanwhile, India imported $20.9 billion worth of auto components, with only 8% ($1.63 billion) coming from North America.
Given these figures, a sudden removal of tariffs could put Indian suppliers at risk, as cheaper imports might flood the domestic market, challenging local manufacturers.
“We are open to fair competition, but the government needs to ensure protective measures for domestic players,” said another industry insider.
How India’s Auto Industry is Responding
In response to the reciprocal tariff challenge, many Indian auto component manufacturers are considering to:
Expand manufacturing operations in the US to bypass tariffs.
Increase local production capacity to remain competitive.
Seek government intervention for a staggered duty reduction policy.
India’s vehicle exports to the US, including cars, tractors, and other built vehicles, stood at $2.5 billion in FY24, while imports from the US were only $0.59 billion. This favorable balance suggests that while some segments may benefit from tariff reductions, others—especially auto component suppliers—need protective measures.
US Tariffs and Global Trade Dynamics
The US has already imposed a 25% tariff on imports from Mexico and Canada, two major trading partners. Additionally, former US President Donald Trump has criticized India’s high import duties, particularly the 110% tariff on automobiles, calling for reductions on American imports.
Indian automotive companies are now exploring strategies to navigate trade barriers while maintaining their market presence in the US. Industry players believe that a calibrated approach to duty reduction is the best way forward.
What Lies Ahead?
As India’s auto sector grapples with the impact of global trade policies, the industry is striving for a balanced approach—one that protects domestic manufacturers while embracing global trade reforms.
With negotiations ongoing, all eyes are on how the Indian government responds to the industry’s demand for a phased duty reduction plan. A well-structured approach could ensure that India’s auto sector remains competitive and resilient in the evolving global market.
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