India’s auto parts get a US tariff breather: Preferential quota in new trade framework

Auto parts

• Move is expected to restore competitiveness for Indian exporters
• Nearly 8% of India’s auto component production was affected by the tariff
• Sona BLW Precision Forgings and Bharat Forge were among the impacted

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India’s auto component industry is set to receive a significant boost after the United States agreed to grant a preferential tariff rate quota for automotive parts, easing the impact of national security-related tariffs that had weighed on exports to the country’s largest overseas market.

In a joint statement, India and the US said that, “consistent with U.S. national security requirements, India will receive a preferential tariff rate quota for automotive parts subject to the tariff imposed to eliminate threats to national security found in Proclamation.” The move is expected to restore competitiveness for Indian exporters and stabilise trade flows in a sector that has faced sustained pressure from elevated tariffs.

The US is the single largest export destination for India’s auto component sector, accounting for 26 percent of total exports and forming the lion’s share of shipments to North America. According to data released by the Automotive Component Manufacturers Association (ACMA) on January 14, India’s auto component exports to North America declined by just under 1 percent year-on-year to $3.64 billion during the January–June period of 2025 (H1FY26).

Despite the marginal dip, North America continued to dominate India’s export basket, accounting for 30 percent of the country’s total auto component exports of $12.2 billion in H1FY26. At the same time, imports of auto components from North America into India rose sharply by 16 percent year-on-year to $920 million, underscoring the depth of bilateral trade in the sector.

The impact of the US tariff had been more pronounced at the production level. According to ICRA Research, nearly 8 percent of India’s auto component production was affected by the tariff. Faced with a steep 25 percent penal duty, consumers of Indian auto parts used in vehicles shipped to the US increasingly shifted sourcing to countries such as China, Vietnam, Indonesia and Japan, which enjoy significantly lower tariff rates.

“We have lots of exports to the US. The impact of the tariff has been after September. Even in the anticipation of the tariff, companies had shipped more than usual. There is a lag of three months in the statistics that we get from the government on exports. But yes, it is impossible for any company to absorb the 25 percent penal tariff and the hit has been there,” said a senior executive from the auto component manufacturing industry.

Several leading Indian auto component manufacturers have been directly exposed to the US market, including Samvardhana Motherson International, Bharat Forge, Sona BLW Precision Forgings and the Rane Group. Among the hardest hit were Sona BLW Precision Forgings and Bharat Forge, which derive about 43 percent and 38 percent of their revenues, respectively, from the US.

Samvardhana Motherson International (SAMIL), however, was relatively better positioned than its peers due to its manufacturing presence in Alabama. The company generates around 20 percent of its total revenue from the US, allowing it to mitigate part of the tariff impact through local production.

Industry leaders believe the preferential tariff rate quota could be a turning point for India–US automotive trade. Ravi Mehra, Managing Director of Uno Minda, said the agreement brings much-needed certainty. “The stability on tariffs brought by this agreement significantly enhances export competitiveness and encourages advanced technology collaboration between the two countries. For Uno Minda, this opens up compelling opportunities to further scale our footprint, strengthen supply-chain agility and expand our contribution to the US market,” he said.

With the US remaining a critical growth market and global supply chains under realignment, the preferential tariff arrangement is expected to improve the outlook for India’s auto component exports, support revenue recovery for leading manufacturers, and deepen strategic trade ties between the two countries.