MEXICO CITY (Business Emerge Exclusive): Mexico has approved a significant increase in import tariffs, raising duties on vehicles from countries without trade agreements, including India, to 50 percent from the current 20 percent. The decision is expected to affect approximately $1 billion worth of Indian car exports, according to industry sources and documents reviewed by BusinessEmerge.com.
The tariff adjustment was approved by Mexican authorities on Wednesday as part of a broader policy to protect domestic manufacturing and employment. The increase will apply to hundreds of products, with vehicles among the most affected categories. Industry sources noted that the decision follows international pressure on Mexico to limit trade with certain countries, including China, even as local business groups had cautioned that higher tariffs would raise operational costs.
Indian car manufacturers, including Volkswagen, Hyundai, Nissan, and Maruti Suzuki, rely on the Mexican market as a key destination for exports. The Society of Indian Automobile Manufacturers (SIAM), which represents these companies, had formally requested India’s commerce ministry in November to engage with Mexican officials to maintain current tariff levels. The letter emphasized the potential impact on Indian auto exports and sought government support for dialogue with Mexico prior to the finalization of the new rates.
The tariff increase could prompt Indian carmakers to reconsider production and export strategies. Mexico ranks as India’s third-largest destination for vehicle exports, after South Africa and Saudi Arabia. Export-oriented production has been a critical component of automakers’ strategies in India, helping optimize manufacturing efficiency, achieve economies of scale, and offset slower domestic sales. The new tariffs may necessitate a reassessment of these strategies.
Volkswagen India’s managing director highlighted that the company has used India as a strong export base for several years, shipping vehicles to over 40 countries. Mexico has been a consistently important market due to rising demand for India-made models. Other manufacturers have similarly positioned their compact cars, typically with engine sizes under one liter, to meet the needs of the Mexican market rather than for re-export to the U.S.
Commercial data indicates that India exported goods worth $5.3 billion to Mexico in the last fiscal year, with car exports accounting for close to $1 billion. Skoda Auto, part of Volkswagen India, represented nearly half of these shipments. Hyundai exported vehicles valued at $200 million, Nissan at $140 million, and Maruti Suzuki at $120 million. Indian automakers have argued that their vehicles do not compete with higher-end models produced locally in Mexico for the North American market.
Industry representatives also noted that Indian car exports constitute approximately 6.7 percent of the total passenger vehicle market in Mexico, where roughly two-thirds of the 1.5 million annual vehicle sales are imports. The tariff adjustment could therefore alter market dynamics, potentially increasing costs for Indian exporters and influencing supply strategies.
The next steps for Indian automakers, industry associations, and government authorities remain unclear. Companies may explore alternative export destinations, adjust pricing strategies, or reconsider the scale of production targeted at Mexico. The development is also likely to influence India’s broader positioning as a low-cost manufacturing hub in international markets.
