US President Donald Trump has announced a 25 percent tariff on imported vehicles and auto parts, set to take effect from April 3. The move is part of his broader strategy to bolster the US automobile industry by discouraging reliance on foreign-made vehicles and components. While the primary impact of this policy will be felt by major auto-exporting nations like Japan, Canada, and Mexico, its ripple effects are expected to reach India’s automotive industry as well.
Understanding the Tariffs
The newly imposed tariffs will apply to finished vehicle imports and automotive parts, potentially raising the cost of purchasing cars in the US. However, a partial tariff exemption will be available for vehicles and components that comply with United States-Mexico-Canada Agreement (USMCA) rules, which favor North American production. The move is expected to raise production costs for US automakers while simultaneously impacting global supply chains.
Although Tesla CEO Elon Musk initially appeared neutral about the policy, he later clarified that it would affect the cost of Tesla parts sourced from international suppliers. Given the complexity of global auto supply chains, the tariffs are likely to create cost pressures not only for vehicle manufacturers but also for auto ancillary companies that supply essential components.
How Will India Be Affected?
India’s direct export of finished vehicles to the US remains relatively small, especially compared to other major automobile-exporting countries. However, auto component exports form a significant part of India’s trade relationship with the US. In 2023, India’s auto parts exports to the US were valued at approximately $1.5 billion, and during the first half of FY25, India exported $3.67 billion worth of automotive components to the US.
The introduction of tariffs is expected to significantly impact auto component suppliers by increasing costs and reducing demand. Indian companies with a strong presence in the North American market may face profitability concerns, as they will either need to absorb higher costs or pass them on to customers, potentially making them less competitive.
Indian Companies Most Affected
Tata Motors and JLR
Tata Motors does not export its own brand vehicles to the US, but its subsidiary Jaguar Land Rover (JLR) is heavily reliant on the North American market. 36 percent of JLR’s total sales in Q3 FY25 came from North America, making it one of the company’s most crucial regions. The imposition of 25 percent tariffs on JLR vehicles could negatively impact its financial performance, as the company may be forced to either increase prices or absorb higher costs, both of which could affect demand.
Eicher Motors
Eicher Motors, the parent company of Royal Enfield, also faces some exposure to the US market. The US is a key market for Royal Enfield’s 650cc motorcycle models, and while this segment contributes a smaller share to the company’s overall revenue, any decline in demand due to tariffs could still have a notable impact.
Auto Ancillary Companies
India’s auto component exports stood at $21.2 billion in FY24, with the US and Europe being the largest importers. Among Indian auto ancillary firms, several companies with a substantial US presence could be significantly impacted:
- Sona BLW Precision Forgings: With 43 percent of its revenue coming from the US, Sona BLW is expected to face a severe impact from the tariffs.
- Bharat Forge: The company has a strong presence in the North American truck and auto component market, making it vulnerable to reduced demand.
- Ramkrishna Forgings: With 26 percent of standalone revenue tied to North America, including exports via Mexico, the company is exposed to potential disruptions.
- Samvardhana Motherson International (SAMIL): Given its significant business footprint in the US, SAMIL is also expected to experience a considerable impact.
Following Trump’s announcement, shares of several Indian auto and auto ancillary companies experienced volatility. Tata Motors’ stock declined by 5 percent, reflecting investor concerns over JLR’s exposure to the North American market. Other companies with significant export exposure to the US also saw their stocks react negatively.
On the other hand, domestic-focused automakers like Mahindra & Mahindra and Maruti Suzuki are expected to remain relatively insulated from these tariffs. Since these companies focus on local production and sales, they are less dependent on the US market for revenue.
What Lies Ahead?
The uncertainty surrounding US trade policies has left many industry players cautious. The frequent shifts in Trump’s stance on tariffs create volatility in global auto markets, making long-term planning difficult for automakers and suppliers alike.
For Indian companies, the key challenge will be navigating higher costs while maintaining competitiveness in the global market. Some firms may look to diversify their export markets beyond the US to mitigate risk, while others might explore ways to increase local production in North America to qualify for USMCA exemptions.
Conclusion
While India’s direct vehicle exports to the US remain low, the impact of Trump’s tariffs on Indian auto ancillary companies could be substantial. Key players like Tata Motors (JLR), Eicher Motors, and major component manufacturers with a strong US presence face the risk of higher costs and lower demand. In contrast, companies with a strong domestic focus may remain largely unaffected.
As the situation develops, investors and industry stakeholders will need to monitor policy shifts, market reactions, and alternative strategies that Indian companies adopt to mitigate the impact of these tariffs. With the US being a major market for auto components, Indian firms may need to explore new strategies to maintain their foothold in the industry.
Market this week
| 24th Mar 2025 (Open) | 28th Mar 2025 (Close) | %Change | |
| Nifty 50 | ₹ 23,515 | ₹ 23,519 | 0.01% |
| Sensex | ₹ 77,456 | ₹ 77,415 | -0.53% |
Source: BSE and NSE
- The Indian market extended gains for the second consecutive week ending March 28, despite volatility from mixed global cues and concerns over upcoming US tariffs.
- Strong buying by domestic and foreign investors, along with rupee appreciation against the dollar, helped the market close in positive territory.
- Sectoral performance: Nifty Media declined 4.6%, while Nifty Pharma and Nifty Auto dropped over 2% each. Nifty Realty and Nifty Metal indices shed 1% each.
- On the positive side, Nifty PSU Bank gained over 2%, and Nifty FMCG rose 1%.
- Foreign Institutional Investors (FIIs) continued their buying streak, investing ₹17,426.31 crore in equities this week.
- Domestic Institutional Investors (DIIs) also remained net buyers, purchasing ₹6,797.49 crore worth of equities.
Weekly Leaderboard
| NSE Top Gainers | NSE Top Losers | ||||
| Stock | Change (%) | Stock | Change (%) | ||
| Bajaj Finserv | ▲ | 8.7% | Zomato | ▼ | -11.4% |
| Grasim Inds | ▲ | 5.7% | IndusInd Bank | ▼ | -5.4% |
| UltraTech Cement | ▲ | 4.9% | Cipla | ▼ | -5.4% |
| Kotak Mahindra Bank | ▲ | 4.4% | M&M | ▼ | -4.9% |
| TATA Consumer Products | ▲ | 4.2% | Dr Reddy’s | ▼ | -4.7% |
Source: BSE
Stocks that made the news this week:
Adani Green Energy Ltd (AGEL) announced the commissioning of a 37.5 MW solar power project at Khavda, Gujarat, through its subsidiary Adani Renewable Energy Fifty Seven Ltd. With this addition, AGEL’s total renewable energy capacity now stands at 13,737.8 MW. A day earlier, AGEL secured a 400 MW solar power project in Rajasthan through its subsidiary Adani Renewable Energy Holding Twelve Ltd, awarded by Uttar Pradesh Power Corporation Ltd (UPPCL) at a tariff of ₹2.57 per kWh for 25 years. AGEL also reported an 85% jump in consolidated net profit for the December quarter, reaching ₹474 crore, driven by higher power supply revenue.
Housing and Urban Development Corporation (HUDCO) will consider a fundraising plan of up to ₹65,000 crore for the next fiscal year in a board meeting on April 4, along with an increase in its overall borrowing limit from ₹1.5 lakh crore to ₹2.5 lakh crore. HUDCO recently announced a ₹2,000 crore fundraise via non-convertible debentures (NCDs) at a 7.19% coupon rate, approved by its Bond Allotment Committee on March 27. Following these announcements, HUDCO shares saw a 2% surge, though they later cooled off.
ITC Hotels surged 6% on March 28, reaching a new all-time high of ₹206 per share, after global brokerage Macquarie initiated coverage with an “outperform” rating and a target price of ₹230, implying an 11% upside. Since its January 29 listing, following the demerger from ITC, ITC Hotels’ stock has gained 16%. Macquarie analysts emphasized ITC Hotels’ position as India’s second-largest domestic lodging company, with a strong presence in Tier-1 markets and a focus on upscale properties
