With US-China Trade Strains Rising, India Emerges as Key Auto Parts Alternative
With trade tensions rising, there is a booming future for Indian auto parts as original equipment manufacturers source alternatives, while India sets its eyes on a US trade deal as tariffs change.
With US-China Trade Strains Rising, India Emerges as Key Auto Parts Alternative
With the ongoing trade tensions between China and the US, global auto manufacturers are more likely to approach alternative suppliers, which could favor Indian auto component makers, says a report by Nomura quoted by news agency ANI.
The report highlights that increasing tariffs on Chinese imports are expected to increase vehicle prices in the US, potentially curbing short-term demand. The reality of globalization has forced international Original Equipment Manufacturers to explore redundancy within their supply chains. According to the report, "Indian auto parts suppliers could be in a better position as OEMs look for alternative options."
Though Indian producers might gain from this change, the US still levies a 25 per cent duty on Indian cars and auto parts under President Donald Trump's retaliatory tariff policy. The additional tariff mentioned covers several product categories- which include, wire harnesses, seat parts, tyres, fuel pumps, bodies of vehicles, bumpers, and cockpit electronics.
The report also warns of wider economic dangers. "Discretionary consumption in India may be put under stress if the tariff war intensifies, especially against the backdrop of declining US growth," t added, pointing to its potential effect on consumer sentiment.
In the midst of these dynamics, the US government has issued a 90-day tariff suspension for trade-friendly nations but not China. India is keenly working towards securing a bilateral trade agreement (BTA) with the US with a possible resolution by fall 2025. "Completing the BTA would further strengthen India's competitive edge," the report interpreted, viewing the freeze on tariffs temporarily as an indication of the Trump government's willingness to negotiate.
Even though there may be continued trade tensions after the 90-day period, Nomura asserted that free of large trade deficit concerns, India-US trade negotiations could ease long-term risk and provide new opportunities for Indian exporters.
