US Tariffs to Squeeze Indian Auto Parts in H2 as New Contracts Waver
Overview
India's auto component industry faces mounting pressure from US tariffs, with effects expected in the second half of FY26. Despite robust H1 growth of 6.8% and strong exports, uncertainty over new contracts and squeezed margins due to the 25% US tariff rate pose significant challenges. Industry body ACMA warns that absorbing these costs is unsustainable, highlighting geopolitical risks and raw material volatility.
Tariffs to Bite in Second Half
The impact of United States tariffs on India's auto component sector will likely materialize in the latter half of the current fiscal year, the Automotive Component Manufacturers Association (ACMA) stated Wednesday. Uncertainty surrounding new contracts looms large.
Industry Growth Amid Headwinds
Despite global headwinds including supply chain disruptions and cost pressures, the Indian auto component industry posted a 6.8% growth in the April-September period of FY26, reaching ₹3.56 lakh crore. Exports climbed 9.3% to USD 12.1 billion, while imports rose 12.5% to USD 12.3 billion, resulting in a USD 180 million trade deficit.
US Tariff Pressure Mounts
Components exported to the U.S. now fall under a 25% tax rate. ACMA Director General Vinnie Mehta noted that this level of tariff makes it exceedingly difficult for the industry, which operates on thin margins, to absorb the costs. He stressed the need for sustainable solutions.
Contractual Uncertainty
While exports to the U.S. remained stable in the first half at USD 920 million, ACMA President-Designate Sriram Viji indicated that future U.S. exports are uncertain. New awards and contracts are in a state of flux, though existing supply chains are expected to continue for a period.
Domestic Strength and Future Outlook
Overall industry growth was underpinned by stable domestic demand and a resilient aftermarket, which grew 9%. Sales to Original Equipment Manufacturers (OEMs) rose 7.3%. Looking ahead, ACMA anticipates improving retail sentiment in H2 FY26, bolstered by potential GST reductions on select vehicle categories and seasonal demand. However, geopolitical uncertainties, rising freight costs, and raw material price volatility remain significant challenges.
