New Delhi: India Inc. faces another external shock to its automotive export engine, with Mexico imposing steep tariffs of up to 50% on passenger vehicles, two-wheelers and auto components from several Asian nations, including India.
The move directly threatens nearly $2 billion of annual shipments to one of India’s most important overseas markets, and risks chipping away at the strong export momentum that automakers have built in Latin American countries like Mexico, Colombia and Chile, and even African nations like Nigeria and South Africa.
While commerce ministry data showed that $2 billion as a fraction of Indian auto’s total exports of $31.4 billion in FY25 (cars $7.2 billion, two-wheelers $3.2 billion, components $21 billion), the Mexican tariff wave threatens to intensify headwinds blowing Indian auto’s way.
On the one hand, the US has raised duties on Indian auto parts to 50%. And on the other, Chinese automakers are rapidly expanding their presence across regions like the Americas and Africa, with experts predicting high market shares for the Chinese in the near future in these areas.
Notably, the Mexican Parliament on Wednesday approved the resolution to increase tariffs to up to 50% on automobile goods from the earlier range of 15-20% for passenger vehicles and two wheelers, and the earlier 0-35% for auto parts makers. The tariff proposal was first mooted by the Mexican government in September.
Companies like Maruti Suzuki, Hyundai, Bajaj Auto, Hero MotoCorp and TVS count the country as a major export hub. Among auto part makers, companies like Sona Comstar and Samvardhana Motherson have presence in the country, including a manufacturing plant.
Mint’s request for a comment on the issue remained unanswered. However, Bajaj Auto had said earlier that it has won exemptions from the Mexican government.
Rakesh Sharma, executive director at Bajaj Auto, said in its 7 November earnings call that Mexico remains the company’s largest Latin American market and noted that while tariffs have been raised to 35%, only two manufacturers — including Bajaj — qualify for a concessional rate.
“Instead of 35%, our tariff will be only 5%. And because we have the ministry’s approval, etc., our plan will continue with 5%, all the others will increase to 35%,” he said.
Experts like Ashim Sharma, senior partner and group head at Nomura Research Institute, said the export outlook for both auto part makers and vehicle makers has clouded due to developments in Mexico and the US.
“However, the key thing will be how the attention for these automakers shifts to some of the new opportunities that are emerging in countries like Japan and the United Kingdom (UK),” Sharma said.
To be sure, investors in the sector were not deterred by the imposition of tariffs, with Nifty Auto growing by 1.11% during Thursday’s trade as against 0.55% growth in benchmark Nifty index.
Headwinds building up
Apart from the tariffs from the US and, now, Mexico. Indian industry has to contend with the rise of Chinese carmakers, with increasing footprint especially in African and South American markets, which are big contributors to Indian auto companies’ businesses.
According to a June 2024 report from consulting firm AlixPartners, Chinese carmakers are expected to have a 13% market share by 2030 in the global car market, up from 3% in 2024. Importantly, much of the gain in market share for Chinese carmakers is expected to come from regions like the Middle East, Africa, and Central and South America.
Chinese carmakers’ share is expected to go up from 7% in the Central and South American markets in 2024 to 28% by 2030. In the Middle East and African markets, the market share is cumulatively expected to go up from 8% in 2024 to 39% by 2030.
What the data shows
According to trade data from the ministry of commerce, Indian car exports to Mexico stood at $938 million in FY25, a growth of 7.37% year-on-year (y-o-y), while two-wheeler exports were at $390 million, a y-o-y growth of 39%.
However, the story has reversed in the first half of this financial year (FY26), with car exports to Mexico growing 17% y-o-y $612 million, while two-wheeler exports fell 30% to $147 million.
As for components, auto parts makers exported $193 million worth goods in the first half of FY26, a 30% y-o-y fall. In FY25, auto part exports to the country stood at $507 million, a y-o-y growth of 20%, trade data from the government showed.
However, estimates from industry lobby Automotive Component Manufacturers Association (ACMA) were higher, suggesting that parts exports to Mexico in FY25 stood at $834 million and H1 FY26 stands at $370 million.
For companies, Bajaj Auto saw its exports grow 17% to 891,858 during the April-September period while TVS Motor Company saw a 35% increase in exports to 680,888 units in the same period. Hero saw its exports jump 54% to 176,000 units in the April to September period.
Among car makers, Maruti Suzuki’s exports grew by 40% to 205,763 units in the April-September period, while Hyundai’s exports grew 17% to 99,640 units, according to Society of Indian Automobile Manufacturers (Siam) data.