Indian Auto Component Industry Faces Rs 4,500 Crore Revenue Shortfall Amid US Tariffs: ICRA

ENA Sectors 2025-04-29 15:32:24 New Delhi, Apr 29 (KNN) Indian auto component manufacturers could experience a revenue shortfall of up to Rs 4,500 crore in the current fiscal year due to declining overseas shipments resulting from recent tariff impacts, according to ratings firm ICRA. ICRA has revised its growth forecast for the Indian auto component industry to 6-8 percent in FY2026, down from the previously projected 8-10 percent. This adjustment accounts for a potential mid-to-high single-digit revenue decline in exports to the United States stemming from tariff-related impacts. The analysis is based on a sample of 46 auto ancillaries with aggregate annual revenues exceeding Rs 3 lakh crore in FY2024. The recent steep increase in import tariffs imposed by the US is estimated to burden the entire supply chain with an incremental cost of approximately Rs 9,000 crore. This additional cost will need to be distributed among US consumers, US importers, and Indian exporters. The extent to which Indian auto component exporters absorb this cost burden will depend on their competitiveness and the price elasticity of their exported products. If Indian auto component exporters absorb 30-50 percent of the incremental tariff costs, ICRA estimates an earnings impact of roughly Rs 2,700-4,500 crore. This represents 3-6 percent of the auto component industry's operating profits and 10-15 percent of auto component exporters' operating profits. The Indian auto component industry continues to benefit from a diversified mix of end-user segments and geographies, with over 70 percent of its revenues derived from domestic sales. The US market constituted only about 8 percent of the overall industry revenues in FY2024, although exports to the US grew at a compound annual growth rate of 15 percent during FY2020-2024. On March 26, 2025, the US government imposed a 25 percent tariff on imported key automobile parts, including engine, transmission, powertrain, and electrical components, effective May 3, 2025. Approximately 65 percent of India's auto component export basket is estimated to fall under this 25 percent import tariff category. Prior to this, a 25 percent tariff was already imposed on the import of steel and aluminium content in auto parts. Following the March 26 order, a reciprocal tariff of 26 percent was imposed on exports from India to the US. This reciprocal tariff is currently on a temporary 90-day pause, though a 10 percent ad valorem duty remains applicable. Products that fall under the US-Mexico-Canada Arrangement are presently exempted from these tariffs. (KNN Bureau) 41908 https://knnindia.co.in/news/newsdetails/sectors/indian-auto-component-industry-faces-rs-4500-crore-revenue-shortfall-amid-us-tariffs-icra 2025-04-29 15:32:24 knnindia.co.in Indian Auto Component Industry Faces Rs 4,500 Crore Revenue Shortfall Amid US Tariffs: ICRA