US automakers defer fresh orders from Indian auto component makers after 50% tariff shock
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United States-based automakers have begun deferring new sourcing decisions from Indian auto component manufacturers following the sharp increase in tariffs imposed last year, according to the Auto Component Manufacturers Association (ACMA). The auto parts body said this has created “uncertainty” around future export growth even as existing supply chains continue largely unchanged.
According to industry executives, the higher duties—announced by US President Donald Trump and applied to Indian goods—have made American and North American buyers hesitant to commit to new contracts, particularly for long-term programmes. September 2025 marked the first full month of the elevated tariffs, which in some categories pushed duties as high as 50%, including a penalty linked to India’s continued purchase of Russian oil.
“The bigger concern is not current supplies but future orders,” said Sriram Viji, ACMA President-designate and managing director of Brakes India. “The tariffs imposed by the US on much of the world, including India, have led to a lot of hesitation from companies in the US and the NAFTA region to source new projects from Indian suppliers.”
January 2026
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Viji noted that India faces a competitive disadvantage as some countries have secured more favourable tariff treatment under US trade rules. “Even a 10 percentage-point difference in tariffs can significantly shift trade flows because margins in the auto component industry are thin,” he said, adding that clarity or a resolution is essential to restore buyer confidence.
ACMA President Vikrampati Singhania, managing director of J K Fenner (India) Ltd, echoed the concern, saying new contracts from the US are “in limbo” even as existing supply chains continue due to the complexity of supplier qualification and approval processes. He added that the depreciation of the rupee against the dollar has partially cushioned the immediate impact.
Domestic demand surges, trade deficit widens
Despite export headwinds from the US, the Indian auto component industry posted steady growth in the first half of FY26. Industry turnover rose 6.8% year-on-year to ₹3.56 lakh crore ($41.2 billion), supported by stable domestic demand, a resilient aftermarket and continued investments in capacity expansion and localisation, according to ACMA.
On the trade front, auto component exports rose 9.3% to $12.1 billion, but imports climbed faster at 12.5% to $12.3 billion, pushing the industry back into a trade deficit of around $180–200 million, compared with a surplus in the year-ago period. While exports to Europe, Africa and Asia recorded healthy growth, shipments to North America remained largely flat amid tariff-related uncertainty.
India–EU FTA seen as diversification opportunity
With exports to the US under pressure, industry executives see the ongoing India–European Union free trade agreement (FTA) negotiations as a potential opportunity to diversify export markets and deepen localisation.
“The FTA is not just about tariffs. It also addresses non-tariff barriers such as certification and homologation, where India and Europe already have fairly synergistic norms,” Viji said. Beyond trade flows, industry leaders believe the agreement could encourage greater European investment in India, enabling access to advanced technologies and strengthening domestic manufacturing capabilities.
H2 risks remain amid geopolitical and cost pressures
ACMA Director General Vinnie Mehta said the impact of the US tariffs is likely to become more visible in the second half of the fiscal. “Supplies to the US have remained steady in the first six months, but the effect of higher tariffs will be felt more in H2,” he said.
Looking ahead, Singhania said domestic demand, supported by GST reductions, seasonal buying and infrastructure-led activity, could offset some export pressures. However, both he and Viji cautioned that geopolitical uncertainty, rising freight costs and the limited availability of critical materials such as rare-earth magnets remain key risks to sustained growth.