Auto Component Industry Expects US Tariff Pain in Second Half of FY26
The Automotive Component Manufacturers Association of India (ACMA) stated on Wednesday that the real impact of US tariffs will likely manifest in the second half of the current financial year. Fresh export contracts face growing uncertainty, even as existing supply chains continue to operate.
Steady H1 Growth Amid Global Challenges
Despite facing global headwinds, the auto component sector posted resilient growth during April–September FY26. Industry turnover increased by 6.8 percent year-on-year, reaching Rs 3.56 lakh crore. This marks a rise from Rs 3.33 lakh crore in the same period last year.
Exports grew by 9.3 percent to $12.1 billion. However, imports climbed faster at 12.5 percent to $12.3 billion. This shift pushed the trade balance into a deficit of $180 million, compared to a surplus of $150 million in H1 FY25.
US Tariffs Create Pressure on Manufacturers
Auto component exports to the United States currently attract a 25 percent tariff. ACMA emphasized that manufacturers struggle to absorb these costs due to thin operating margins.
"The tariffs took effect from September, so the pressure will become more apparent in the second half rather than the first," explained Vinnie Mehta, Director General of ACMA. He added that while companies might manage short-term challenges, a longer-term solution remains necessary.
Shipments to the US remained largely flat in the first half. Exports totaled $3.64 billion, slightly down from $3.67 billion a year earlier. More concerningly, visibility on new business has weakened significantly.
"Existing supply chains continue for now, but new awards and fresh contracts appear stuck in limbo," noted Sriram Viji, ACMA President-Designate.
Domestic Demand Provides Crucial Support
Domestic demand helped cushion the impact of external challenges. Sales to original equipment manufacturers (OEMs) rose 7.3 percent to Rs 3.04 lakh crore. This growth was led by passenger vehicles and light commercial vehicles.
The aftermarket segment expanded by 9 percent to Rs 53,160 crore. This increase was supported by a growing vehicle base and greater formalization of repair and maintenance channels.
Electric vehicles accounted for 4.6 percent of total OEM supplies. This indicates a gradual shift toward new mobility technologies within the industry.
Mixed Outlook for Second Half of FY26
ACMA President Vikrampati Singhania said demand conditions in H2 FY26 could improve. Better retail sentiment, seasonal factors, and infrastructure-led activity may drive this recovery.
He also highlighted the post-September reduction in GST on select vehicle categories. This change could boost passenger vehicles and two-wheelers, with spillover benefits for component makers.
However, the industry continues to grapple with multiple risks. These include:
- Geopolitical tensions
- Freight cost pressures
- Raw material price volatility
- High GST rates on auto components
- Limited availability of critical inputs like rare-earth magnets
Export Performance and Key Markets
ACMA noted that first-half export growth occurred despite several obstacles. Supply-chain disruptions, raw material cost pressures, and softer demand in key global markets posed significant challenges.
The United States and Germany remained the largest export destinations for Indian auto components. Meanwhile, China, Japan, and Germany served as the main sources of imports.
The industry body's assessment suggests a cautious optimism tempered by practical concerns. While domestic markets show strength, international trade dynamics present ongoing hurdles for manufacturers.
