New Delhi: With higher tariffs on Chinese imports set to raise vehicle prices in the US, global automakers are likely to turn to alternative suppliers like India, said Nomura in its latest report.
According to the report, the Indian auto part makers will gain traction amid the US-China trade tensions.
"The new tariff will lead to higher vehicle prices in the US and negatively impact demand in the short term. However, this will accelerate global Original Equipment (OEs) to look for other alternatives where Indian Auto part suppliers may stand to gain," the report added.
As part of the reciprocal tariffs announced by US President Donald Trump, there is no change in the 25 per cent tariff imposed on the import of Indian automobiles and auto parts (wire harnesses, seat components, tyres, fuel pumps, vehicle bodies, bumpers and cockpit electronics).
In 2023, China exported USD 11 billion of auto parts to the US compared to only USD 2 billion from India.
The report further adds that there is also a demand risk for Indian discretionary consumption as the US growth weakens.
"The consumer sentiment could take a hit in case tariff wars escalate," the report added.
In the latest developments, as widely reported by the American media platforms, China is evaluating the tariff negotiations with the US.
The US has paused the tariffs for 90 days on countries willing to negotiate a trade deal. India is also avoiding a confrontation with the US and negotiating for a bilateral trade agreement (BTA), which is likely to be finalised by the fall of 2025.
"Once that happens, India's competitive positioning should improve further, in our view," the report added.
Evaluating the 90-day pause on tariffs except for China, the report says that the move shows President Trump's intent to negotiate further.
The report adds that even though some trade tensions might continue after the 90-day pause, the ongoing talks for a trade deal between India and the US--where the trade gap isn't a big issue--could help reduce long-term risks.
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