Opportunity in Adversity

Heftier import tariff on Chinese auto parts provides an opening for Indian firms in US

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President Donald Trump's decision to impose a 25% tariff on imported cars and auto parts, effective April 3, certainly comes as a blow to the Indian component makers. With exports to the US reaching around $6 billion in FY24, accounting for 27% of the country's total auto component exports, the tariff hike threatens to disrupt revenues and impact margins for firms like Sona BLW Precision Forgings and Bharat Forge, which derive 43% and 38% of their earnings from the US, respectively. In comparison, passenger vehicle manufacturers, barring Tata Motors' subsidiary Jaguar Land Rover, remain unaffected, as India's exports of fully built vehicles to the US are negligible. However, amid the adversity, there's also an opportunity for Indian component makers to pivot strategically, particularly vis-a-vis China.