Mexico’s Senate has approved a tariff package to protect national industry and producers. This tariff package will be applicable from January 1, 2026. Import duty of up to 50 percent will be imposed on selected products from Asian countries including India and China from the year 2026. Under this, auto, auto parts, textile, clothing, plastic, steel, metal and footwear are the main targets, tariffs on most products will be around 35 percent slab, but passenger vehicle duty will increase from 20 percent to 50 percent.
Indian automobile sector will be more affected
India’s automobile sector exports to Mexico are estimated to be worth about $5.7 billion in 2024-25, with vehicles accounting for nearly a third, the industry said. But now due to the tariffs imposed by Mexico, the automobile sector is likely to be particularly affected. Indian-made cars like Hyundai’s Creta, Kia’s Magrite and Volkswagen are quite popular in Mexico. India is the fifth largest auto supplier to Mexico. The Indian auto industry is likely to suffer losses due to doubling of tariff duties.
Auto industry expressed concern
The Indian auto industry has expressed concern to the government over Mexico’s proposal to more than double the import duty on countries deprived of free trade agreements. On this subject, representatives of Society of Indian Automobile Manufacturers (SIAM) and Auto Component Manufacturers Association (ACMA) have met officials of Commerce and Bharati Udyog Ministries and expressed their concern about the challenges faced in exporting vehicles and parts to the foreign market.
Threat to volume and margins of leading auto companies
“Indian car exporters to Mexico, mainly Volkswagen, Hyundai, Maruti Suzuki, are being directly impacted, threatening volumes and margins in that market, which accounts for about 9 percent of India’s global automobile exports,” said Jahol Prajapati, research expert at SAMCO Securities. Apart from autos, increased tariffs on engineering goods, electronics and metals are likely to dampen demand, Japati says. However, certain Indian products, which have a strong market share, may suffer price losses rather than volume losses.
India’s car export market may suffer losses
Auto sector expert Chintan Sathe says Mexico is a major destination for Indian car exporters. Contribution of $887 million (Rs 7,900 crore) in the last financial year, making it the third largest market after South Africa and Saudi Arabia. Automobile companies like Maruti Suzuki and Skoda Auto together export about 100,000 vehicles annually, which is about 12 percent of India’s total car exports. Auto sector reports show that Indian carmakers exported 770,000 passenger vehicles last fiscal year, indicating that the Mexico market is important for Indian carmakers. According to the report, Mexico is India’s largest two-wheeler export market ($390 million) and also the second largest market for three-wheelers ($51 million). Additionally, Mexico is the third largest destination for Indian auto parts, with exports expected to reach $834 million in FY2025.
