Mexico’s 50% Tariff Threatens US$1 Billion in Indian Auto Exports

Mexico’s decision to raise import tariffs on passenger vehicles from 20% to 50% is expected to affect roughly US$1 billion in Indian vehicle exports beginning next year, impacting automakers including Volkswagen, Hyundai, Nissan and Maruti Suzuki. The measure, approved by the administration of President Claudia Sheinbaum, applies to imports from countries without free trade agreements with Mexico, including India and China.

According to industry documents and sources, Indian automakers had urged New Delhi to intervene ahead of the decision, warning that the tariff increase would directly disrupt export operations to Mexico.

The tariff adjustment is part of a broader update covering hundreds of product categories. Mexican authorities have said the move is intended to protect domestic employment and manufacturing capacity. The timing also coincides with continued US pressure on Mexico to curb commercial ties with China, a factor shaping broader trade policy discussions. Mexican business groups have cautioned that higher duties could increase costs for companies that depend on imported inputs.

The Society of Indian Automobile Manufacturers (SIAM), which represents brands such as Volkswagen, Hyundai and Suzuki, formally requested intervention from India’s Ministry of Commerce in November. In a letter, the group stated: “The proposed tariff hike is expected to have a direct impact on Indian automobile exports to Mexico. We seek the Government of India’s support to engage with the Mexican government.” SIAM argued that maintaining current tariff levels was essential to sustain export flows and production planning. Details of the correspondence had not been previously disclosed.

Mexico is India’s third-largest export market for passenger vehicles, after South Africa and Saudi Arabia. Indian automakers rely heavily on exports to maintain production volumes and achieve economies of scale. Industry sources said the tariff increase could prompt companies to reassess long-term strategies, including their reliance on Mexico as a destination for compact vehicle output. Exports also help manufacturers offset weaker domestic demand and manage margins during market fluctuations.

Indian customs data cited in the SIAM letter show that India exported US$5.3 billion in goods to Mexico in the last fiscal year, with nearly US$1 billion attributable to passenger vehicles. Skoda Auto, part of the Volkswagen Group, accounted for about half of India’s vehicle shipments to Mexico. Hyundai exported approximately US$200 million, Nissan about US$140 million, and Suzuki roughly US$120 million.

“Mexico has consistently been one of our important export markets, given the rising demand there and the traction of our India-made models,” said Piyush Arora, director and CEO, Škoda Auto Volkswagen India.

Automakers told Indian officials that most vehicles exported from India to Mexico are compact models with engines smaller than one liter, designed specifically for the Mexican market and not intended for re-export to the United States. As noted in SIAM’s letter, “Indian-origin vehicles are not a threat to Mexican local industry, as they do not compete with the higher-end segments manufactured in Mexico for the North American market.”

Manufacturers also emphasized that Indian vehicles represent a limited share of Mexico’s overall auto market. Of the roughly 1.5 million passenger vehicles sold annually in Mexico, about two-thirds are imported, with Indian-made vehicles accounting for approximately 6.7% of total sales. As a result, automakers argue that while the tariff hike is unlikely to materially alter Mexico’s domestic manufacturing landscape, it will significantly affect companies that rely on Mexico as a stable export destination.