Mexico’s decision to raise tariffs on India is set to impact $1 billion car exports from the world’s third largest car market, including those by Volkswagen Group AG and Hyundai Motor Co., despite the industry lobbying against such a move.
In a letter to India’s commerce ministry in November, the Society of Indian Automobile Manufacturers had urged the government to press Mexico to “maintain status quo” on tariffs for vehicles shipped from India.
“The proposed tariff hike is expected to have a direct impact on Indian automobile exports to Mexico…we seek Government of India’s support to kindly engage with the Mexican government,” the industry body said in its letter to the commerce ministry before the tariff was finalised.
Reuters has seen a copy of the letter. It was not immediately clear what steps the carmakers, SIAM and the govenrment will take next.
On Wednesday, Mexico approved up to 50% tariff on hundreds of items from countries it doesn’t have trade agreements with, including India and China, to protect local jobs and manufacturing. The move also comes amid US pressure on Mexico to curtail business with China, despite opposition from local business groups warning that higher tariffs will raise costs.
Impact of Mexico tariff on India Auto
Mexico is India’s third largest car export market after South Africa and Saudi Arabia The tariff hike will increase the import duty on cars to 50% from 20%, dealing a significant blow to Volkswagen, Hyundai, Nissan and Maruti Suzuki, forcing them to re-evaluate strategy on exports.
Carmakers in India have relied on exports to ensure production is maximised and there are economies of scale. Some also rely on exports to cushion slower domestic sales or improve margins—a business strategy that may need to be redrawn.
In meetings with government officials last month, carmakers said the majority of shipments from India to Mexico are compact cars with an engine size of less than one litre, which are designed for the Mexican market and not for further export to the US, one of the sources said.
India shipped goods worth $5.3 billion to Mexico in FY24, of which cars made up close to $1 billion, according to the letter and customs data.
India car exports to Mexico
Carmakers also told government officials that of the 1.5 million passenger vehicles sold in Mexico each year, about two-thirds are imported and India’s shipments make up “just about 6.7 percent” of the total sales, according to sources and the letter.
Skoda Auto accounts for nearly 50% of India’s total car shipments to Mexico. Hyundai shipped cars worth $200 million, Nissan’s exports stood at $140 million and Suzuki’s at $120 million, the customs data showed.
“Indian-origin vehicles are not a threat to Mexican local industry as Indian vehicles do not cater to high-end segments manufactured by Mexico for serving the North American market,” SIAM said in its letter.
India’s commerce ministry, SIAM and the Mexican government did not respond to requests for comment. Hyundai and Maruti Suzuki did not respond to requests for comment, while Nissan declined to comment.
Piyush Arora, the chief of VW’s Indian unit, said that India has been a strong export base for many years and the company ships to more than 40 countries from here. “Mexico has consistently been one of our important export markets, given the rising demand there and the traction of our India-made models,” Arora said before the tariffs were approved.