US President Donald Trump late last evening (August 5) announced that fresh tariffs on pharmaceuticals and semiconductors could be unveiled within the coming week, further complicating the global trade dynamics.
Countries around the world are bracing as new waves of US tariffs are due to take effect this week. India is at a disadvantageous position as Trump’s tariffs on the country are not only at a significantly high 25% but he has also threatened to raise the US tariff on Indian imports “very substantially over the next 24 hours” due to the country’s purchases of Russian oil.
Now, India faces fresh headwinds being one of the largest exporters of pharmaceutical products. Moreover, any duties on semiconductors could also impact its auto sector.
Semiconductor Tariffs: Likely impact on auto sector
The Nifty Auto index has lost 3% in the last one year, as it grapples with slowing sales, commodity and supply headwinds and the possible impact of auto tariffs.
Now, analysts believe that Donald Trump’s likely tariffs on semiconductor imports threaten to disrupt the global supply chain, creating ripple effects across industries heavily reliant on chips.
“The Indian automotive sector, including passenger vehicles, commercial fleets, and electric vehicles, is particularly exposed due to its full dependence on imported semiconductors,” said Justin Khoo, Senior Market Analyst – APAC, VT Markets.
Prashanth Tapse, Senior-VP Research at Mehta Equities, believes that auto OEM exporters to the US may come under pressure if proposed semiconductor tariffs by the US trigger a rise in input costs or disrupt global supply chains.
“Automakers that rely on imported chips for components like EV controllers and infotainment systems could face production cost escalation or even supply shortages,” he added.
Automobile exports from India rose by 19% to over 5.3 million units in the last 2024-25 fiscal year, driven by robust demand for passenger vehicles, two-wheelers and commercial vehicles in the overseas markets, industry body Siam stated.
The segment reported its best-ever yearly performance last fiscal, driven by demand for global models being manufactured in India, it added.
Back in FY24, Indian passenger vehicle manufacturers lost roughly 300,000 units due to chip scarcity. “Manufacturers across passenger, commercial, and electric segments could face renewed chip scarcity and rising input prices, risking assembly-line disruptions,” Khoo said, adding that EV makers are especially vulnerable.
Electric vehicles require nearly twice the semiconductor content of conventional cars — putting them at greater risk.
Indian auto component manufacturers, such as Bharat Forge, have expressed caution regarding their US export business for the current fiscal year, citing challenging market conditions influenced by U.S. tariffs and ongoing regulatory uncertainties.
Tapse believes that stocks such as Sona BLW, Bharat Forge, and Samvardhana Motherson are likely to remain under pressure, given their significant export exposure and dependency on global chip supplies. Meanwhile, automakers with US exposure — such as Tata Motors (via JLR) — could also be impacted indirectly through rising costs and logistical challenges across the supply chain, he added.
Contra View
Contrary to the other opinion, Dr. Vikas Gupta, CEO & Chief Investment Strategist at OmniScience Capital, does not foresee an impact for India as we are not a major exporter of semiconductors. Indian Auto sector is a user of semiconductors, and again, the tariffs in US imports are unlikely to have any impact on Indian companies, he said.
He advised investors in the auto space to stick to domestically focused companies or companies with low exposure to the US markets.
“During all this, do not forget that business fundamentals matter. Companies with strong balance sheets, persistent competitive advantages, large domestic growth opportunities and that are available at a significant discount to their intrinsic values,” Gupta added.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
