IEC 2025: Rising tariffs and rapid tech change test India’s auto component exports, says Vinnie Mehta

India is emerging as a key beneficiary of the ongoing restructuring of global supply chains, driven by geopolitical shifts and the accelerating “China plus one” strategy, but rising trade barriers and rapid technological change are creating fresh challenges for the automotive components industry, Vinny Mehta, director general, Automotive Component Manufacturers Association of India (ACMA) said at India Economic Conclave 2025.

Speaking at the IEC2025, Mehta said the Covid-19 pandemic was a defining moment for global manufacturing, exposing deep vulnerabilities in supply chains that were never stress-tested at such scale. He noted that even low-cost components such as semiconductors had the potential to halt entire production lines, forcing manufacturers to reassess their dependence on single geographies and rethink risk management strategies.

“The biggest learning was not to take anything for granted in the supply chain,” Mehta said, adding that companies now need to thoroughly analyse vulnerabilities and identify what can be produced domestically or sourced from trusted partner countries.

While India has benefited from global manufacturers diversifying away from China, Mehta cautioned that the world is becoming increasingly protectionist. He highlighted the impact of rising tariffs on Indian auto component exports, particularly to the US and Europe, which together account for a significant share of the industry’s overseas shipments. In FY24, India exported $23 billion worth of auto components out of a total industry turnover of $80 billion, with the US alone accounting for $6.6 billion. New tariffs, he said, have made several Indian components uncompetitive in key markets.

Against this backdrop, Mehta underlined the importance of free trade agreements, while stressing that India must strengthen its bargaining position by building scale, technology capability and domestic resilience.

On technology, Mehta said the future competitiveness of the auto component industry will be defined less by cost advantages and more by technological capability, as vehicles rapidly transition towards software-defined architectures. He noted that vehicle development cycles have shrunk from around five years to nearly 12 months, placing immense pressure on the supply chain to deliver technologically advanced and cost-competitive products at much faster speeds.

However, Mehta flagged low investment in research and development as a structural concern. The Indian auto component industry spends about 0.7 percent of its turnover on R&D, broadly in line with India’s overall R&D spending as a share of GDP, but significantly lower than global peers. He attributed this partly to the high cost of capital in India, which makes companies more risk-averse, especially when developing new products.

He also pointed to the growing role of global capability centres (GCCs) in India, noting that over 60 GCCs are dedicated to the automotive sector, many focused on auto components. While these centres are creating world-class engineering capabilities, Mehta said much of the intellectual property remains overseas, and urged Indian component makers to build their own large-scale engineering and R&D centres.

On quality, Mehta said Indian tier-one component manufacturers are largely at par with global standards, but added that greater attention is needed to upgrade tier-two suppliers, as consistency and reliability are critical for global competitiveness. He warned that recalls and quality failures can have severe financial and reputational consequences, particularly in safety-critical components.

Turning to electric vehicles, Mehta said India’s EV transition is progressing unevenly across segments. While electric buses and three-wheelers have gained momentum and two-wheelers are nearing a tipping point, passenger vehicle penetration remains low but is expected to rise as product offerings improve and more mass-market players enter the segment. Falling battery costs and the emergence of new chemistries, he said, will further support adoption, although challenges remain around charging infrastructure, financing and domestic cell manufacturing.

With low vehicle penetration levels and significant headroom for growth, he said India is well positioned to scale up production, attract investment and play a larger role in global automotive supply chains over the coming decade.