With the Donald Trump-led US administration pressing India to remove tariffs on imported cars, Nomura said that ‘there would be no sizeable impact’. While India is ready to make further deductions, a full elimination of duties is not currently on the cards. A Reuters report said that the Indian government is cautious about an immediate reduction to zero. The two countries will discuss India’s high auto tariffs during its formal talks for a bilateral trade deal, paving the way for Tesla’s much talked about India launch.
India on a strong wicket: Will the tariff movement have a major impact?
In the case of auto components, India is very cost competitive, Nomura stated. “The average hourly wage in India is $1.5 vs ~$2.5 in Mexico and $15 in the US. For shop floor workers, the wages in the US are ~5x vs that in India. Indian suppliers have been able to build a reasonable scale with leadership in certain products such as EV differentials, bevel gears and crankshafts,” the analysis report by the brokerage firm elaborated. While the Indian share has been rising but is still low at approximately 2 per cent due to the integrated supply chains of global OEMs.
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Considering this, even in a scenario where India decided to lower import duties on auto components to zero, there would be no sizeable impact, since, as Nomura explained, the duty differentials are not large and the risk of imports is low. “Higher tariffs by the US on countries such as Mexico, Canada and China may, in fact, benefit Indian exporters in gaining further share,” it said.
Now in case of India deciding to lower import duties, there will be a slight increase in competitive intensity in the PV and premium motorcycles industries at the higher end, Nomura said. But interestingly, and to India’s advantage, the average car price in the US is 447k (Rs 4.1 million), which is significantly higher than the ASP in India of $11K (Rs 949k) in FY25. Many foreign players such as GM and Ford have already exited the Indian market due to a lack of relevant models thereafter making losses for many years. “Thus, in our view, one strategy the Indian government could adopt is to offer a substantially lower duty for cars made in the US,
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