India is safe in Donald Trump's tariff game!
The US government led by donald trump is pressuring india to remove the tariff on imported cars. However, brokerage firms like Nomura say that even if india does so, it will not have any major impact. The indian government is ready to reduce the tariff further, but at present there is no plan to eliminate it completely. According to a Reuters report, the indian government is hesitant to reduce the tariff completely. This issue will be discussed during the formal talks of the bilateral trade deal between the two countries, which can pave the way for Tesla's entry into India.
India's strength in auto components
According to Nomura, india is very cost competitive in terms of auto components. The average hourly wage in india is $ 1.5, while in mexico it is $ 2.5 and in the US it is $ 15. The salary of shop floor workers in the US is 5 times higher than that of India. indian suppliers have established a strong hold in products like EV differentials, bevel gears and crankshafts. However, due to the integrated supply chain of global OEMs, India's share is still around 2 percent.
What will be the impact?
According to Nomura, even if india reduces the import duty on auto components to zero, it will not have any major impact, because the duty differential is not high and the import risk is also low. The high tariffs imposed by the US on countries like mexico, canada and china can benefit indian exporters.
What will happen in the case of cars?
If india reduces the import duty, then competition in the PV and premium motorcycle industry may increase slightly. But interestingly, the average price of cars in the US is 447k (about Rs 4.1 million), which is much higher than the 11k (about Rs 9.49 lakh) in india in FY25. Many foreign companies like GM and ford have already exited the indian market because they did not have the right models for the market here and were continuously running in losses. According to Nomura, the indian government can offer lower duty for cars made in the US as a strategy, provided they do not take advantage of the system by importing cars or components from countries like mexico or China. That is, this benefit should be only for those cars which have up to 90 percent value addition in the US.
click and follow Indiaherald WhatsApp channel