As the United States implements higher tariffs on Chinese imports, global automakers are increasingly considering India as a major alternative for sourcing auto components, according to a new report by the Japanese financial services firm Nomura. The firm reported that the shift in trade dynamics, triggered by escalating US-China tensions, is going to benefit Indian auto part suppliers crucially.
Nomura’s analysis highlights that the recently announced tariffs will raise vehicle prices in the US, potentially weakening consumer demand in the short term. However, this disruption is expected to accelerate global Original Equipment manufacturers (OEMs) in diversifying their supply chains away from China.
“Indian auto part suppliers may stand to gain,” the report noted, pointing to India’s growing capability in manufacturing critical components like wire harnesses, tyres, seat elements, fuel pumps, cockpit electronics, and more.
Despite the shifting dynamics, the US continues to maintain a 25% tariff on Indian automotive imports, unchanged from previous years. In 2023, China exported $11 billion worth of auto parts to the US, while India’s contribution stood at a modest $2 billion. The evolving landscape presents an opportunity for India to expand its share if trade barriers are eased.
The report also flags concerns over potential risks to Indian discretionary consumption due to a possible downturn in US economic growth. “Consumer sentiment could take a hit if tariff wars escalate,” it warned.
Amid these developments, China is reportedly reviewing its own stance on tariffs, while the US has introduced a 90-day pause on new tariffs for countries open to trade negotiations, excluding China. India, in turn, is treading cautiously, seeking to finalize a bilateral trade agreement with the US by fall 2025.
Nomura interprets the pause as a sign of President Trump’s willingness to engage in further negotiations. The report concludes that the ongoing Indo-US trade talks, where the trade imbalance is relatively modest, could help mitigate long-term economic risks and enhance India’s global trade positioning.
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