Mexico Tariff Hike: Can this tariff hike disrupt India’s ₹7,900 Cr auto export market ?

India’s automobile exports to Mexico have surged strongly, reaching nearly $2 billion in 2023 with a 22% growth over the previous year. Indian-made cars like Hyundai’s Creta, Kia’s Magnite, and Volkswagen models are popular in Mexico, making India the country’s 5th largest auto supplier. Growth is driven by competitive pricing and growing demand for Indian vehicles in Mexico’s expanding market.

Mexico Export Hub

India’s auto industry has raised red flags with the government over Mexico’s proposal to more than double import tariffs on countries without free trade agreements. Representatives from the Society of Indian Automobile Manufacturers (SIAM) and the Auto Component Manufacturers Association (ACMA) recently met officials from the commerce and heavy industries ministries, highlighting potential risks to vehicle and component exports to a key overseas market.

Mexico has emerged as a key destination for India’s car exports, accounting for $887 million (Rs 7,900 crore) in the last fiscal, making it the third-largest market after South Africa and Saudi Arabia. Automakers like Maruti Suzuki and Škoda Auto Volkswagen India together ship nearly 100,000 vehicles annually, or about 12% of India’s total car exports, underlining Mexico’s growing strategic importance.

Mexico has become a critical export hub for India’s auto industry, accounting for over one-fifth of Maruti Suzuki’s 330,000 exported cars in FY25. Overall, Indian carmakers shipped 770,000 passenger vehicles last fiscal, underscoring Mexico’s rising importance as a gateway market.

The country is also India’s largest two-wheeler export market ($390 million) and the second-largest for three-wheelers ($51 million). Additionally, Mexico ranks as the third-largest destination for Indian auto parts, with exports touching $834 million in FY25, highlighting deepening trade links across the mobility ecosystem.

Trade Headwinds

Despite being a major auto manufacturing hub, Mexico remains heavily dependent on passenger vehicle imports, especially in the sub-compact and compact segments, due to intra-industry trade. The country produces about 4 million vehicles annually, exporting 3.5 million units, while 64% of its 1.5 million domestic car sales are imported, highlighting strong import-led demand.

Mexico is poised to sharply hike auto import duties, proposing to raise passenger vehicle tariffs to 50% from 20%, two-wheeler duties to 35% from 15%, and auto parts tariffs to 10–50% from the current 0–35%. The proposal, expected to be cleared by the Mexican Parliament, could come into force from January, potentially reshaping global auto trade flows.

Additionally, Indian pharmaceutical companies planning to expand in Mexico are increasingly concerned about the impact of the proposed tariff hikes. Major players such as Sun Pharma, Dr Reddy’s, Glenmark, and Hetero already operate in the country.

Despite their presence, Indian drug makers still hold a relatively small share of Mexico’s $20 billion pharma market. Mexico imported $338 million worth of medicines from India in 2024–25, against its total pharma imports of $8–9 billion, indicating significant headroom but rising policy risk.

Conclusion

Mexico’s proposed tariff surge poses a meaningful risk to India’s fast-growing auto export engine, especially in cars, two-wheelers, and components, where Mexico has become a vital market. While demand for Indian vehicles remains strong, higher duties could erode competitiveness, squeeze margins, and disrupt FY26 growth momentum unless timely diplomatic engagement or policy adjustments soften the impact.

Written by Abhishek Singh

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