Rising Tariffs Boost India's Auto Parts Market Amid US-China Trade Tensions

Nomura's report indicates that with increasing tariffs on Chinese auto imports, global automakers may seek alternative suppliers like India. As US-China trade tensions escalate, Indian auto part manufacturers stand to benefit. India is negotiating a bilateral trade agreement with the US to further enhance its competitive edge.

In a recent report, Nomura highlights the potential shift in global automotive supply chains as higher tariffs on Chinese imports are set to inflate vehicle prices in the United States. This could prompt manufacturers to consider alternative suppliers, with India prominently positioned as a viable option.

The report underscores that while the immediate impact of new tariffs will elevate vehicle prices and suppress demand, they could eventually lead original equipment manufacturers (OEs) to explore alternatives, benefiting Indian auto part suppliers. Currently, there remains a 25% tariff on Indian auto parts, but no changes have been announced.

Reflecting on trade developments, the report cites that in 2023, China exported $11 billion worth of auto parts to the US, dwarfing India's $2 billion. Nonetheless, Indian consumption faces risks from the US economic slowdown. With the US implementing a 90-day pause on tariffs for negotiation, India is working on a bilateral trade agreement, expected by fall 2025, which could solidify its market position.

(With inputs from agencies.)