Auto Parts Industry Eyes Resilient Export Growth Despite Tariff Headwinds

Image Source : ET Auto

India’s auto component industry remains cautiously optimistic about export growth despite facing steep tariffs from the United States and Mexico. Industry leaders and analysts believe that the long-term impact of these trade barriers will be limited, thanks to India’s cost competitiveness, diversified markets, and the global shift toward resilient supply chains. While short-term disruptions are expected, particularly in commercial and off-road vehicle segments, manufacturers are confident that strategic sourcing and technological specialization will help sustain momentum.

The sentiment was echoed at the annual conference of the Automotive Component Manufacturers Association of India (ACMA), where stakeholders assessed the evolving trade landscape and outlined adaptive strategies.

Key Highlights From Industry Response

- India’s auto component exports to the US and Mexico remain modest at Rs 6,600 crore and Rs 500 crore respectively
- Over Rs 3,000 crore worth of commercial and off-road vehicle parts now face 50 percent tariffs in the US
- Industry leaders expect exports to recover, supported by India’s cost advantage and multi-sourcing agreements
- Opportunities identified in ICE powertrain components and wiring harnesses
- Exporters with US-based manufacturing operations remain partly insulated
- Operating margins may moderate by 150 to 250 basis points in FY26

Tariff Impact And Strategic Adjustments

The recent tariff hikes—50 percent on Indian auto parts by the US and similar measures by Mexico—have raised concerns across the sector. However, the industry’s exposure to these markets is relatively low, accounting for less than 10 percent of total export revenue. This limits the overall financial impact, even though specific product categories such as engines, transmissions, and electrical components are directly affected.

Manufacturers are adjusting by renegotiating contracts, exploring alternate markets, and leveraging multi-sourcing models. These agreements allow global customers to source critical components from multiple geographies, reducing dependency on any single country. While higher landed costs from India may temporarily affect competitiveness, suppliers believe that long-term relationships and technological investments will prevent abrupt contract losses.

Export Opportunities And Product Focus

Despite the tariff turbulence, India’s auto parts industry is identifying new growth pockets. ICE powertrain components, which are becoming less viable in high-cost locations due to falling global volumes, offer a strategic advantage for Indian exporters. Similarly, wiring harnesses—used extensively in electric and hybrid vehicles—are emerging as a high-potential category.

Companies like Spark Minda Group are already capitalizing on these trends, with exports of wiring harnesses gaining traction in Europe and Southeast Asia. The industry is also investing in R&D to enhance product quality and meet evolving regulatory standards in target markets.

Financial Outlook And Margin Pressure

Credit rating agency ICRA estimates that the new tariffs could lead to a Rs 2,700 crore to Rs 4,500 crore hit on earnings across the sector. Exporters may absorb 30 to 50 percent of the additional costs, leading to a 10 to 15 percent impact on operating profits. Overall, the industry’s operating margins could decline by 50 to 100 basis points, while exporters may see a sharper moderation of 150 to 250 basis points in FY26.

However, debt metrics and liquidity are expected to remain stable, supported by strong domestic demand and diversified revenue streams. Exporters with manufacturing facilities in the US are better positioned to weather the tariff storm, as local production helps bypass import duties.

Forward Outlook

India’s auto component industry is entering a phase of recalibration, balancing tariff challenges with strategic opportunities. While geopolitical uncertainty and trade barriers pose short-term risks, the sector’s fundamentals remain strong. Cost efficiency, engineering capabilities, and global partnerships will continue to drive export resilience.

As supply chains evolve and markets seek alternatives to high-cost sourcing, India is well-placed to expand its footprint in key automotive segments. The next few quarters will be critical in determining how effectively the industry adapts and repositions itself in the global trade matrix.

Sources: Economic Times, Business Standard, Hindustan Times Auto