Thursday | Apr 17 2025 | 11:50:07 AM
On a calm spring morning in early April 2025, an announcement from the United States sent shockwaves through the global automotive industry. U.S. President Donald Trump, known for his bold and often controversial decisions, announced that his government would impose a 25 per cent tariff (an import tax) on all foreign cars and automobile parts entering the U.S. market to "bring back American jobs and manufacturing pride" — a familiar message to his supporters.
While his announcement was made with great enthusiasm at home, it triggered concern across the globe. Auto manufacturers, parts suppliers, and investors quickly started to assess how this new policy would affect business — not just in the U.S., but around the world.
Understanding the Tariff Plan: A Two-Step Approach
President Trump’s tariff is being rolled out in two phases:
While several developed countries, including Germany and Japan, strongly criticised the move, India responded with restraint. Government officials in New Delhi described the decision as a “mixed bag” — not ideal, but not disastrous either. They emphasized that India and the U.S. are still working towards a comprehensive trade agreement, which could be signed before the end of 2025.
India’s Auto Exports to the U.S.: Not a Major Concern
In terms of car exports, the tariff will have little direct impact on India. India hardly sells fully built cars to the U.S. In 2024, it exported just $9 million worth of passenger vehicles to America — only 0.13 per cent of its total car exports. That’s a tiny number in global trade terms, and it means India’s automakers don’t have much to lose in this area. But there’s another side of the story that matters more — and that’s auto parts.
Auto Parts: The Real Area of Risk for India
India is a significant player in the global auto components market. Indian companies supply everything from engines and gearboxes to brake systems and electrical wiring to carmakers around the world — including many in the U.S.
In fact, the United States is India’s largest export market for auto components. In 2024 alone, India sent $6.8 billion worth of parts to American manufacturers and aftermarket companies. These parts are used not only in new cars but also in vehicle repairs and upgrades. This is where the 26 per cent tariff becomes a serious concern.
For large, well-established suppliers, the damage might be manageable. But smaller Indian exporters, especially those with tight profit margins, could be hit hard. They might struggle to either raise prices to cover the extra cost or quickly find new buyers in other countries.
Still, analysts say India might retain some competitive edge, thanks to its low manufacturing costs. And since the U.S. is taxing all countries, not just India, some of that pricing disadvantage could be balanced out. Countries like China, Mexico, South Korea, and Germany are also affected — meaning the playing field has been leveled somewhat.
Industry leaders in India are keeping a close eye on the situation. The Auto Components Manufacturers Association of India (ACMA) said that while the tariff creates uncertainty, India's small market share (only 3 per cent of U.S. auto imports) gives it some flexibility. It’s not the biggest target — and that may actually work in its favour.
A Push for Self-Reliance: India’s ‘Make in India’ Moment
Even before the tariffs were announced, India’s car industry had started looking inward. The government and businesses have been trying to cut back on imports and increase local production, especially for electric vehicle (EV) parts, safety equipment, and critical electronics used in modern cars.
The new tariff policy could speed up these efforts. Manufacturers are now investing more in India to make things like electric motors, batteries, airbags, sensors, and automatic gearboxes right at home. These steps are part of the broader “Aatmanirbhar Bharat” (Self-Reliant India) campaign launched by Prime Minister Modi. The goal is to make India a global manufacturing powerhouse, not just for domestic needs, but also for exports.
Instead of retaliating with its own tariffs, the Indian government is choosing diplomacy. Officials are focusing on signing a fair and beneficial trade deal with the U.S. Recent decisions like reducing import duties on American luxury goods and removing a tax on digital services are being seen as friendly signals to Washington.
Global Industry Reels from the Shock
Outside India, the impact has been swift and sharp. In the U.S., auto stocks fell right after Trump’s announcement. Tesla dropped by 6 per cent, GM by 4 per cent, and Ford by 3.5 per cent. In China, electric vehicle giant BYD lost billions in market value overnight.
U.S. carmakers are already responding. Ford, for example, is now offering employee pricing to all customers, giving people the kind of discount usually reserved for workers. It’s a move to soften the blow of possible price hikes.
Tesla, which buys a lot of parts from Mexico and China, is in a tough spot. If the company decides to pass the new cost onto buyers, prices could go up by $4,000 per car. But if it eats the cost, it might lose up to $3 billion in profits this year — a major setback as it races to meet its electric car goals.
General Motors is playing the long game. It’s pushing ahead with plans to make EV batteries in the U.S. and build new supply partnerships locally. But these projects take time and money — and until then, companies are likely to see profits shrink.
China, the world’s biggest car market, could be among the worst affected. Companies like BYD were looking to expand into the U.S. market soon — but those plans are now on hold. And while China hasn’t responded officially yet, there are talks of it limiting exports of important materials like lithium and semiconductors — items U.S. industries depend on.
India’s Strategic Opportunity
While countries like China and Germany are busy reacting, India is in a more unique and balanced position. Yes, the tariffs will hurt some exporters. But at the same time, many global companies are now looking beyond China for new suppliers and manufacturing bases — and India is high on that list.
India has skilled labor, a growing EV ecosystem, rising local demand, and strong government support. Foreign car makers are already expanding operations here — not just to sell cars locally but to use India as a base for global supply.
At a recent industry event in Mumbai, Prime Minister Modi didn’t criticize the U.S. decision directly. But he sent a clear message: “Global disruptions demand local strength. We must see this not as a crisis, but as an opportunity. It’s time to build smarter, manufacture faster, and make India a hub for future-ready vehicles.”
Looking Ahead: Can India Turn Challenge into Opportunity?
India may not be at the center of this trade storm, but it definitely has a chance to come out stronger. If the country acts fast — by improving infrastructure, supporting exporters, and attracting more global investment — it could move from being seen as a low-cost supplier to becoming a strategic manufacturing partner for the world’s biggest auto brands. For now, all eyes are on how India adapts — and whether this tariff disruption becomes a stepping stone toward a stronger, more self-reliant auto industry.
