The 25% tariff imposed by the Trump administration on foreign-made automobiles, in addition to auto parts, presents a chance for progress for the nation’s thriving electrical car ecosystem, in accordance with industry leaders.
The 25% tariff on foreign-made automobiles took impact on April 3, 2025, whereas the 25% tariff on auto parts will take impact from Might 3, even because the industry awaits clarification on the parts included beneath the tariff.
Based on Pratik Kamdar, co-founder and CEO of Neurone Power, the tariff is prone to improve the price of EVs, which can encourage firms to make use of native manufacturing. Maharashtra, a key EV hub in India, performs a big position in each imports and exports inside the sector. The newly introduced 25% tariff on auto parts by the U.S. authorities is predicted to influence world provide chains, doubtlessly rising prices for producers that depend on U.S. imports, notes Kamdar.
“This example may drive progress alternatives for Maharashtra’s EV sector. The elevated prices could push firms to speculate in native manufacturing, decreasing dependency on imports and strengthening India’s home EV industry,” says Kamdar.
Based on Rohan Dewan, co-founder and CEO of LeafyBus (a Delhi-based electrical bus operator), the tariff on imported automobiles and auto parts may current a big alternative for India to strengthen its automotive provide chain and set up itself as a world hub for electrical automobiles (EVs). “With increased tariffs on Chinese language auto parts, India’s rising auto parts industry may step in to fill the hole. This shift may enhance exports and appeal to investments in native manufacturing. India can even capitalise on the chance by ramping up the manufacturing of EV parts and batteries, aligning with authorities incentives just like the Manufacturing Linked Incentive (PLI) scheme,” notes Dewan.
In 2024, India’s auto element exports to the US stood at $8.2 billion, accounting for 27% of its complete auto element exports. As per export-import information from the Division of Commerce, a big surge in EV exports was noticed through the first seven months of the calendar yr 2023. From January to July 2023, EV exports elevated by 246.3%, rising from Rs 7,988.62 lakhs in 2022 to Rs 21,391.40 lakhs in 2023, primarily pushed by robust demand from Nepal and European international locations resembling France and Germany.
“With US automotive tariffs rising, India’s electrical car sector has a main alternative to seize a bigger share of the US market, particularly in the finances automotive section. China’s 2023 auto and element exports to the US stood at $17.99 billion, whereas India’s had been solely $2.1 billion in 2024, highlighting the expansion potential. To speed up this, the federal government ought to improve the PLI scheme by together with extra auto parts, opening it to new gamers, and increasing it by two years,” says Saurabh Agarwal, Companion & Automotive Tax Chief at EY India.
Alternate markets
Industry leaders observe that the tariffs may additionally current a chance for Indian auto element producers to discover new markets. “Whereas increased tariffs on imports in the U.S. could improve prices and make Indian EV parts much less aggressive in that market, India has the chance to diversify and develop its world footprint. Exploring newer markets in Europe, Southeast Asia, and the Center East may help offset export losses and drive sustainable progress,” says Kamdar.
“This shift may additionally appeal to world producers to arrange manufacturing services in India, aligning with the nation’s Make in India and Aatmanirbhar Bharat initiatives. By investing in native manufacturing, international firms can bypass tariff-related prices whereas having access to India’s quickly rising EV market. Moreover, the PLI scheme can additional assist EV producers by encouraging funding in home manufacturing,” he provides.
Want coverage assist
With the 25% tariff introduced by the Trump administration, the decision for coverage assist has grown louder amongst industry stakeholders. As per Leafybus’s Dewan, the federal government can improve insurance policies like FAME II, decrease GST charges for EVs, and promote native manufacturing by way of import duties and the PLI scheme.
Based on Kamdar, authorities subsidies may help offset the influence of upper tariffs by decreasing prices for each shoppers and producers. “ Initiatives just like the extension of the FAME scheme and the Manufacturing-Linked Incentive (PLI) program can play a vital position in accelerating market progress. Moreover, incentives for native battery manufacturing and direct buy subsidies may help stabilize demand and promote home manufacturing, strengthening India’s EV ecosystem,” says Kamdar.
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