US Remains Top Export Market for Indian Auto Parts Despite Trade Probe

The United States remained India's largest auto parts export market, accounting for twenty-six percent of shipments in the financial year ended March 31, 2026, despite escalating tariff tensions between the two nations.

According to data from the Automotive Component Manufacturers Association (ACMA), the US accounted for 26% of all auto components exported from India last fiscal. Germany followed with 9%, and Thailand with 4%.

Overall auto component exports from India saw a 5% increase, reaching $24 billion in FY26.

This development occurs while the Office of the United States Trade Representative (USTR) is conducting investigations into alleged unfair practices by auto parts exporters from India. The Section 301 investigation is examining two main areas: unfair labor practices in India and the creation of excess production capacities, allegedly supported by government subsidies.

The next hearing for this matter is scheduled for later this month. India is among the 16 countries currently under investigation by the USTR.

Vinnie Mehta, director general of ACMA, commented on the situation. "If we had overcapacity, why would the industry be investing now in expanding production? The auto component industry does not get any subsidy from the government. In fact, out of the 1100 members at ACMA, only two have received disbursements under the PLI (Production Linked Incentive) scheme."

Mehta also refuted the allegations of unfair labor practices. "They (USTR) have alleged that we mistreat our labour. The auto component industry in India is highly organised and adheres to the national labour code. Use of child labour - which is another allegation - is non-existent," Mehta stated.

Approximately half of the auto parts exported from India to the US are subject to a 25% tariff, with the remaining facing a 12.5% tariff. The components currently under the 12.5% tariff rate are the focus of the USTR's investigation.

Interestingly, this investigation is proceeding even as the US actively encourages American firms to diversify their supply chains away from China amidst a geopolitically charged global landscape. Mehta noted that several Indian firms have received Request for Quotations (RFQs) from US companies seeking to increase procurement from India.

"These RFQs explicitly require these companies to state that while they are a Tier-I supplier in India, no part of their supply chain is dependent on China. They are also reflective of the growing confidence global firms now have on India as a sourcing hub," Mehta added.

ACMA anticipates that the auto component industry will grow by 8-10% in the current financial year, driven by strong exports and consistent domestic demand. The industry achieved revenues of Rs 7.59 lakh crore ($85.9 billion) in the previous fiscal, a 12.7% increase in rupee terms. However, for the first time in two years, the sector recorded a trade deficit of $1.4 billion, as imports grew at a faster rate than exports.

China was the largest source of imports for auto parts into India, accounting for 36% of all shipments.

ACMA President Vikrampati Singhania expressed a positive medium- to long-term outlook for the Indian auto component industry. "Growing domestic demand, infrastructure-led economic growth, expanding manufacturing investments, deeper global integration through Free Trade Agreements and increasing global sourcing from India are creating significant opportunities for the sector," Singhania said.