US targets India's $6 billion auto component exports with twin probes into labour practices, overcapacity

The United States has launched two investigations targeting India's auto component industry, raising fresh uncertainty for exports worth around $6 billion to the American market even as India’s apex auto component industry body dismissed allegations of labour violations and government-backed overcapacity.

The investigations, being conducted under Section 301, focus on two issues: labour practices and alleged excess manufacturing capacity arising from government subsidies.

The labour investigation has already resulted in a proposed 12.5% tariff on certain auto component imports, while a separate probe into overcapacity is still underway, with the final outcome yet to be announced.

ACMA Director General Vinnie Mehta rejected the allegations, saying India's auto component sector neither receives meaningful government subsidies nor engages in unfair labour practices.

"The auto component industry does not get any subsidy from the government," Mehta said, noting that only two of ACMA's 1,100 member companies have received any disbursement under the Production Linked Incentive (PLI) scheme.

"There are no government schemes that are doling out money. If we had overcapacity, we would not be investing in more capacity," he added.

On the labour-related allegations, Mehta said the industry complies with India's labour laws and recently introduced labour codes.

"The auto component industry is an organised part of manufacturing. We do not employ child labour. It is a very technical sector," he said.

Amid tariffs, India’s exports to the US have remained flat at $6.24 billion in FY26 compared with $6.18 billion worth of exports in FY25. The US, however, remains India’s top destination for auto component exports, accounting for 27% of the industry’s total exports.

Tariff impact still uncertain

Mehta explained that nearly half of India's auto component exports to the US are already covered under Section 232, under which they attract a 25% tariff.

The US had last year imposed a 10% duty on imported auto components, including those from India.

The latest Section 301 investigations add another layer of uncertainty, said Mehta.

"The first investigation has concluded with a 12.5% tariff, but the US has clarified that this will not be stacked over the 25% Section 232 tariff," Mehta said.

However, the second investigation into alleged overcapacity remains open.

"They could put another 10%, 12.5% or some other number. We do not know what that number will be," he said, adding that any additional tariff could potentially be stacked on products not covered under Section 232.

The auto component industry, which employs 50 lakh people, is now pinning hopes on the ongoing negotiations for a bilateral trade agreement between India and the US.

"The Government of India is negotiating the best possible deal. We need to wait and watch how much tariff eventually would be applied on Indian auto components," Mehta said.

He also pointed out that India is not being singled out, with around 16 exporting countries facing similar investigations.

"We are all in the same boat because these are all competing countries," he said.

ACMA is representing India’s auto component industry at the United States Trade Representative (USTR).

“I travelled to the US in April. I am also likely to travel this month where there are two investigations on labour and excess capacity due to government subsidies. The Indian government has refuted these,” said Mehta.