Indian auto component industry seeks new markets amid US tariffs

The Indian auto component industry is grappling with export challenges driven by US tariffs, sluggish demand in the Middle East, and an economic slowdown in Europe, as per a report by DAM Capital Advisors. To counter these hurdles, Indian manufacturers are actively expanding their client base across new markets.

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India’s auto component industry is currently navigating a challenging landscape due to multiple external economic factors. A recent report by DAM Capital Advisors highlights key hurdles faced by the sector, primarily the ongoing tariff overhang imposed by the United States, currency depreciation affecting demand in select Middle Eastern countries, and a significant slowdown in the European market. These elements have created uncertainty in export demand, posing serious concerns for industry stakeholders.

The report notes that Indian auto component manufacturers with limited exposure to these regions are actively working on mitigating risks. Companies are strategically expanding their global footprint by acquiring new clients across different geographies. Additionally, they are diversifying their product portfolios and securing smaller orders from both automotive and non-automotive sectors. This approach is expected to provide resilience against export market fluctuations and sustain growth momentum.

Domestically, the Indian automobile industry is witnessing near-term demand weakness. While overall demand remains stable, growth has been sluggish in key segments. Price competition has intensified, leading to increased discounting across most vehicle categories. The passenger vehicle (PV) and commercial vehicle (CV) segments, in particular, are facing demand headwinds, whereas the two-wheeler market is performing relatively better. Exports of two-wheelers and three-wheelers continue to remain strong, offering some stability to the sector.

Among the various automobile segments, the tractor industry stands out as a bright spot, with projections of double-digit growth by March 2025. Favorable monsoon conditions and increased rural demand are driving this positive outlook. This segment’s growth trajectory offers a much-needed boost to the overall industry, balancing out some of the ongoing challenges in other categories.

Despite these challenges, India’s auto component manufacturers remain optimistic about outperforming the industry. This confidence stems from several evolving trends, including the increasing content per vehicle, premiumization, the integration of new features, and the rising adoption of electric vehicles (EVs), which require a greater number of components. The push towards EVs, in particular, presents significant growth opportunities for component manufacturers, with increasing investments in localization and technological advancements.

Furthermore, many companies are planning to introduce new products and expand their existing offerings to counteract the industry slowdown. Experts anticipate a gradual recovery in the second half of FY26, coinciding with the festive season, which traditionally stimulates higher consumer demand.

While current market conditions remain uncertain, strategic adaptability and diversification efforts are expected to help India’s auto component industry maintain a steady growth trajectory in the long run.