As global automakers face mounting uncertainty due to escalating tariffs on Chinese imports, India is fast emerging as a viable and resilient alternative for manufacturing auto components. A recent report by Nomura, cited by ANI, suggests that India stands to benefit significantly as Original Equipment Manufacturers (OEMS) look to diversify their supply chains away from China.
With the United States increasing tariffs on Chinese auto parts, international auto majors are reassessing their sourcing strategies. The Nomura report notes that while the immediate impact may be an increase in vehicle prices in the US, the broader shift could favour Indian manufacturers in the medium to long term.
“Global OES are expected to accelerate efforts to explore alternative suppliers, where Indian firms are poised to gain traction,” the report stated.
In 2023, China exported auto components worth $11 billion to the United States, whereas India’s exports stood at a modest $2 billion. Despite the gap, analysts view this as a significant growth opportunity for Indian suppliers to scale operations and capture a larger share of the global market.
Interestingly, the US has maintained its existing 25 per cent tariffs on Indian automotive imports — including components like seat parts, tyres, wire harnesses, cockpit electronics, fuel pumps, and bumpers. While these tariffs remain high, their stability amidst broader tariff upheavals is seen as offering predictability for global automakers operating in uncertain times.
However, the report does caution that a slowdown in US economic growth could dampen consumer demand, posing a risk to India’s discretionary exports in the auto sector. A prolonged global trade conflict could also impact overall market sentiment.
Amid these dynamics, the US has announced a 90-day delay in implementing additional tariffs for countries willing to engage in trade negotiations, a window India is actively utilising. Unlike China, which remains locked in a tariff deadlock with Washington, India is pursuing a bilateral trade agreement with the US, expected to be finalised by fall 2025.
“Once the deal is in place, India’s competitiveness in the global automotive supply chain is likely to strengthen further,” the Nomura report added.
The 90-day pause is also viewed as a tactical move by the US administration, signalling openness to negotiation while maintaining pressure on China. Experts believe that a successful trade agreement between India and the US could reduce long-term trade risks and deepen economic cooperation, especially given the relatively small trade deficit between the two nations.
With global supply chains realigning and India actively enhancing its manufacturing capacity, the country is well-positioned to capitalise on the current geopolitical flux, transforming trade tensions into strategic advantage.
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