Auto trade: US tariffs to bite in H2 as contract uncertainty clouds outlook; ACMA flags margin stress

The auto component industry expects the real impact of US tariffs to play out in the second half of the current financial year, with uncertainty beginning to cloud fresh export contracts even as existing supplies continue, industry body ACMA said on Wednesday.Despite global headwinds, the sector posted steady growth in the first half of FY26. Industry turnover rose 6.8 per cent year-on-year to Rs 3.56 lakh crore during April–September, up from Rs 3.33 lakh crore in the year-ago period. Exports increased 9.3 per cent to $12.1 billion, while imports climbed faster at 12.5 per cent to $12.3 billion, pushing the trade balance into a $180 million deficit, compared with a surplus of $150 million in H1 FY25. Auto component exports to the US currently attract a 25 per cent tariff, which ACMA said is difficult for manufacturers to absorb given thin operating margins.“The tariffs came into effect from September, so the pressure will be felt more clearly in the second half rather than the first,” ACMA Director General Vinnie Mehta said, adding that while companies may manage in the short term, a longer-term solution is needed.Shipments to the US remained largely flat in the first half, with exports of $3.64 billion compared with $3.67 billion a year earlier. However, visibility on new business has weakened.“Existing supply chains are continuing for now, but new awards and fresh contracts appear to be in a state of limbo,” said Sriram Viji, ACMA President-Designate.ACMA noted that first-half export growth came despite supply-chain disruptions, raw material cost pressures and softer demand in key global markets. The US and Germany continued to be the largest export destinations, while China, Japan and Germany were the main sources of imports.Domestic demand helped cushion the impact of external challenges. Sales to OEMs rose 7.3 per cent to Rs 3.04 lakh crore, led by passenger vehicles and light commercial vehicles, while the aftermarket expanded 9 per cent to Rs 53,160 crore, supported by a growing vehicle base and greater formalisation of repair and maintenance channels. Electric vehicles accounted for 4.6 per cent of total OEM supplies, indicating a gradual shift towards new mobility technologies.ACMA President Vikrampati Singhania said demand conditions in the second half of FY26 could improve on the back of better retail sentiment, seasonal factors and infrastructure-led activity. He also pointed to the post-September reduction in GST on select vehicle categories as a potential boost for passenger vehicles and two-wheelers, with spillover benefits for component makers.At the same time, the industry continues to grapple with risks from geopolitical tensions, freight cost pressures, raw material price volatility, high GST rates on auto components and limited availability of critical inputs such as rare-earth magnets, Singhania said.