A new US trade probe could affect India's auto component exports, with authorities reviewing concerns related to overcapacity and government support in manufacturing, according to Vinnie Mehta, Director General of Automotive Component Manufacturers Association of India (ACMA).

"The US has initiated an investigation under Section 301. It has identified 16 countries, including India, on the premise that these countries have excess capacity and that their industries are subsidised by governments. If this is established, tariffs may be imposed over and above the existing 10% as a penal rate," said Vinnie Mehta.

Under Section 301 of the Trade Act of 1974, the United States is empowered to investigate trade practices considered unfair and to impose unilateral tariffs or restrictions if such practices are found to harm domestic industry. In this case, the investigation is examining whether excess manufacturing capacity, supported by state incentives, is contributing to market distortions and pricing pressures in global trade.

The development comes at a time when the Indian auto component industry has closed FY25. Industry turnover was close to US$ 80 billion, with exports at approximately US$ 23 billion and imports at a comparable level, resulting in a marginal trade surplus. Supplies to OEMs continued to account for the majority of revenues, while the aftermarket contributed roughly US$ 11 billion, supported by an expanding vehicle parc.

This trend continued into FY26. In the first three quarters, the industry recorded steady growth, with exports broadly stable year-on-year despite emerging global trade uncertainties towards the latter part of the fiscal year. Domestic demand across passenger vehicles, two-wheelers, and commercial vehicles offset pressure on overseas shipments, maintaining overall industry performance.

Against this backdrop, and as FY26 draws to a close, the Section 301 investigation introduces an additional layer of uncertainty.

Duties on several imported auto components into the US currently stand at approximately 10%, following a period of volatility, legal challenges, and recalibration of earlier tariff measures. The Section 301 route creates the possibility of additional tariffs being imposed over and above this baseline, effectively converting them into targeted penalty duties.

The investigation, initiated by the Office of the United States Trade Representative, spans multiple sectors, including automotive, electronics, semiconductors, and clean energy. It reflects a shift in US trade policy, expanding scrutiny beyond individual countries to concerns such as industrial overcapacity and subsidy-led manufacturing.

For India's automotive ecosystem, the implications are notable. The US remains a key export destination, accounting for roughly 25-30% of India's auto component exports, particularly in high-value engineering components and the aftermarket segment. Indian suppliers have also been expanding capabilities in EV components, electronics, and software-driven systems, in alignment with evolving global supply chains.

In the near term, the impact of any tariff escalation may remain limited. Automotive supply chains are characterised by long validation cycles and established supplier relationships, making immediate sourcing shifts difficult. Export trends in recent months have also been supported by advance shipments ahead of potential tariff changes, along with limited short-term alternatives for buyers.

The medium-term impact could be structural. As new vehicle programmes are planned and sourcing strategies are reassessed, tariff exposure is likely to become a key decision-making factor. Suppliers from regions with lower tariff risks or more favourable trade arrangements may gain an advantage, potentially affecting India's export growth trajectory.

The investigation remains at an early stage, with industry bodies and the government expected to submit responses as part of the consultation process. Such processes typically take several months before any trade action is finalised.

At present, domestic demand continues to provide some support. However, the Section 301 investigation indicates a shift in the external operating environment. The industry's growth phase may increasingly be influenced by global trade policy, with tariff exposure emerging as a key factor in determining competitiveness in the next phase of export growth.