Trump's latest tariff on heavy truck imports may put pressure on European manufacturers

The US administration had initiated a probe in April 2025 under the Section 232 of the Trade Expansion Act into the import of heavy trucks. The investigation laid basis for import tax on goods considered as critical to national security.

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26 Aug, 2025 12:21

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US President Trump's latest tariff on imported heavy trucks - aimed at protecting domestic commercial vehicle manufacturers - will put some of the leading global truck manufacturers such as the Volvo Group, Daimler Truck, Toyota-group's Isuzu and the Volkswagen Group among others at a disadvantage, many of whom have Indian auto component makers as OEM partners or vendors.

The US has imposed a 25% tariff on heavy‐duty trucks imported into the America, effective from next month. “Beginning November 1st, 2025, all Medium and Heavy-Duty Trucks coming into the United States from other Countries will be Tariffed at the Rate of 25%,” President Trump posted without further details. Trump had last month said that he intends to impose the levy to "protect our Great Heavy Truck Manufacturers from unfair outside competition".

While Indian automotive manufacturers are not direct exporters to medium & heavy trucks into the US, they are suppliers or partners with some of the global truck makers that export into the US.

Shares of Bharat Forge had slipped lower by over a percent in early trade on October 7, but it has recovered, while Samvardhana Motherson and Sona Comstar are showing mixed trends.

Indian OEMs with US and Europe Exposure

Several Indian auto OEM players are part of the global networks for Volvo and Daimler among others to supply components such as forgings, wiring harnesses, steering and brakes or components for powertrains that go into trucks sold globally. Any official word from the OEM players is awaited, but if the American clients choose to pass on the cost of tariffs on imported CVs, there may be some degree of impact on demand from suppliers.

Bharat Forge derived Rs 4,728 crore as export revenue in FY25, and is India's largest exporter of auto components. Its commercial vehicles is directly impacted by the economic recovery in Europe, which had been muted last fiscal, resulting in its FY25 revenue from CV business at Rs 2,015.2 crore, a de-growth of 4.6% on year.

"Given the recent tariff announcement by the US government and changes to emission regulation in North America, we are cautious on the outlook for the US export business for the reminder of the fiscal," Baba Kalyani, CMD of Bharat Forge had said after the June quarter earnings.

"FY26 is likely to be a challenging period, given where we are in the overall cycle and our geographical exposure. Our focus is on capturing opportunities in businesses & geographies which are relatively unaffected and work simultaneously on cost optimization to minimize impact of operating deleverage," Baba Kalyani added.

Bharat Forge's North American CV business saw a growth in FY25 despite flat volumes in the Class 8 truck market. "However, the recent trade policy changes by the United States of America have resulted in an additional layer of uncertainty. These are likely to further accentuate inflationary pressures in the US pushing overall CV and PV industry volumes lower," the company mentioned in its annual report in July.

Samvardhana Motherson is a supplier to Europe's Daimler Group, among others, though it is also an OEM for US-based manufacturers such as Ford, Stellantis and other American EV makers. The company's European collaborations expanded during FY25, supplying battery cables, engine harnesses, cabin wiring, and fuse boxes for trucks, buses, and agricultural machinery. In North America, Samvardhana Motherson had secured projects in "commercial, off-highway, and recreational vehicle segments", as well as for fuel-cell electric vehicles.

During FY25, Europe saw its sharpest contraction as light vehicle production fell by 5.9%, reflecting softness in demand that has led to a 'recalibration of EV strategy' by major OEMs, Motherson had recently said. "The pace of recovery remains muted given the backdrop of geo-political tensions and uncertainty around tariff related policies," Samvardhana Motherson earlier this year. Adding to the uncertainty in the US market has been the recent change in the stance on EV-friendly legislation. Meanwhile, Canada has put in place legislation setting the target of achieving 100% zero-emission vehicle sales by 2035.

Brokerage View

Motherson's key European clients are the most vulnerable, Elara Capital had said in a recent note earlier this month. This could have a 'ripple effect on suppliers like Motherson', as has been captured in the recent guidance cut by Volkswagen, Mercedes, Porsche and Audi. Elara has a Sell rating on SMIL with a target price of Rs 83 per share citing limited scope for margin expansion, as seen in Q4FY25 and Q1FY26.

America's Truck Makers in Slow Lane

While the American truck manufacturing has been facing a slump during the first half of 2025 due to supply chain worries and caution over economic uncertainty, the registrations of Chinese trucks rose by 5.3% during the first half of 2025, as Beijing supported the industry with incentives for scrappage and pushed new energy policies.

What Led to the Tariff

The US administration had initiated a probe in April 2025 under the Section 232 of the Trade Expansion Act into the import of heavy trucks. The investigation laid basis for import tax on goods considered as critical to national security.

The levy on imported trucks is aimed at supporting US brands and encourage manufacturing in America, and follows tariffs on steel and aluminum imports. However, the duties could make commercial vehicles used in construction or logistics business costlier.

What Next

The tariffs are expected to impact manufacturers such as Volvo Group and Stellantis with facilities in Mexico, which is a major exporter of heavy truck into the United States, along with Canada, Japan and Germany. Given that the tariffs directly impact some of America's allies, it remains to be seen if there are any discussions on carveouts of exemptions. The US is the largest export market for Daimler's trucks.

It also remains to be seen if Indian OEM suppliers or European manufacturers choose to increase localisation from America, or explore to increase exports to other markets, in order to offset any business impact. Volvo had said that its US trucks have 60-70% local components and import other components into America.