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US tariff puts Indian auto components, tyre exporters on edge
Industry News- Aug 07,25
A 25 per cent US tariff on Indian imports strains tyre and auto component exports, while domestic sales in June 2025 show mixed trends across passenger, commercial, and two-wheeler segments.
The recent imposition of a 25 per cent tariff by the United States on Indian imports has raised alarm across India’s automotive and tyre sectors, both of which hold significant export exposure to the US market. With the US accounting for 27 per cent of India’s auto component exports and 17 per cent of tyre exports, the tariff increase puts Indian manufacturers at a competitive disadvantage to Asian peers like Japan, Vietnam, and Indonesia, which face lower or preferential duties.
As per ICRA, the tariff hike may weaken the competitiveness of Indian suppliers, particularly in off-highway and replacement tyre categories, as well as various auto components. Indian tyre exporters, once enjoying a slight edge over Chinese counterparts, may now see that advantage eroded due to favourable tariff structures offered to other Southeast Asian nations. Auto component exporters highly reliant on the US are likely to explore geographical diversification and cost efficiency measures to mitigate impact.
At home, the Indian auto sector’s performance in June 2025 presented a mixed outlook.
Passenger Vehicles (PVs)
Passenger vehicle wholesale volumes dropped 9 per cent month-on-month and 7 per cent year-on-year amid macroeconomic pressures and weak buyer sentiment, despite festive offers and steady SUV demand. Q1 FY2026 PV wholesale volumes saw a 1.4 per cent YoY dip, though retail sales remained stable. FADA reported inventory levels rising to 55 days by end-June. SUVs made up 65–66 per cent of total PV sales, with utility vehicles expected to be future growth engines.
ICRA forecasts a 1–4 per cent wholesale growth in FY2026, aided by festive season recovery and new launches, although supply constraints, including limited rare earth magnets for EVs, could hamper momentum. Export volumes rose 14 per cent sequentially in June, driven by Maruti Suzuki and Hyundai, though forex shortages and inflation in African markets pose export risks.
Commercial Vehicles (CVs)
The CV segment showed varied trends. Wholesale volumes dropped 3.8 per cent YoY in June and 1.7 per cent YoY in Q1 FY2026. However, retail volumes increased 6.6 per cent YoY in June, hinting at dealership inventory correction. Light commercial vehicle (LCV) retail volumes climbed 8.8 per cent YoY, with FY2026 wholesale growth expected at 3–5 per cent YoY. The LCV space faces pressure from electric three-wheelers and demand for used vehicles.
Medium and heavy CVs (M&HCVs) showed 3.4 per cent YoY retail growth in June, while sequential volumes slipped 7.4 per cent. ICRA expects M&HCV wholesale growth of 0–3 per cent in FY2026. The bus segment is projected to outperform with 8–10 per cent YoY growth on the back of replacement demand. Overall CV wholesale volumes are anticipated to rise 3–5 per cent YoY in FY2026, driven by infrastructure spending and steady economic conditions.
Two-Wheelers (2Ws)
The two-wheeler industry experienced a 4.3 per cent YoY and 4.8 per cent sequential drop in wholesale volumes in June 2025, totalling 1.5 million units. However, retail volumes rose 5.1 per cent YoY, supported by rural and semi-urban demand, though sequential demand slowed due to the monsoon. Exports posted a strong 34 per cent YoY growth, albeit from a low base. Foreign exchange shortages and inflation in countries such as Nigeria still pose headwinds.
ICRA estimates 6–9 per cent YoY wholesale growth in FY2026 for 2Ws, supported by replacement demand, improved urban activity, and good rural incomes thanks to a normal monsoon. Electric two-wheelers (e2Ws) registered modest 5 per cent sequential growth in June, reaching 105,282 units. e2W penetration held steady at 6–7 per cent of total 2W sales.
Outlook
With global trade volatility and pending negotiations over a bilateral India-US trade deal, India’s auto and tyre sectors face headwinds in FY2026. However, infrastructure-led demand and festive tailwinds may partly cushion domestic markets.
While inventory overhang, supply chain constraints, and macroeconomic uncertainty continue to challenge the domestic auto market, retail demand remains steady. ICRA anticipates moderate growth across all major vehicle segments in FY2026, with stronger prospects for buses and two-wheelers due to favourable economic and seasonal factors.
India
ICRA
US tariffs
tyre exports
automotive components
Maruti Suzuki
Hyundai
EVs
rural demand
India-US trade
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