Auto industry flags Mexico’s plan for steep tariff hike; pharma firms also worried
Representatives from the Society of Indian Automobile Manufacturers (SIAM) and Auto Component Manufacturers Association (ACMA) recently met officials from the commerce ministry and the ministry of heavy industries regarding the development.
Pharmaceutical companies preparing to increase their presence in Mexico are also concerned about the impact of the proposed tariff increase on their plans.
With exports of $887 million (₹7,900 crore) in the last financial year, Mexico was the third largest destination for automobile exports from India after South Africa and Saudi Arabia.
Companies like Maruti Suzuki and Škoda Auto Volkswagen India ship around 100,000 vehicles to Mexico every year, or about 12% of India’s total automobile exports.
Mexico accounted for more than a fifth of market leader Maruti Suzuki’s total exports of 330,000 cars in FY25, people in the know said. Automakers in India exported 770,000 passenger vehicles last fiscal. Mexico also constitutes the largest market for India’s two-wheelers ($390 million) and the second largest market for its three-wheelers ($51 million). It is also the third largest market for Indian-made auto parts after the US and Germany. It is noteworthy that Indian companies exported parts worth $834 million in FY25. “This (Mexico) is an important export destination for manufacturers across categories in the automotive industry,” said a senior industry executive, requesting anonymity. “Any increase in tariffs will further negatively impact companies here in the current geopolitical environment. Auto parts exports to the US are already under pressure after the increase in tariffs.”
Mexico is also a growing market for Indian pharmaceutical and agricultural equipment exports. Pharmaceutical industry executives said there is huge untapped potential for Indian companies in the country.
“Currently, there is no duty on medicines manufactured in India and the imposition of any duty will hinder interest in this country,” said a senior pharmaceutical executive. The person stated that multinational pharmaceutical manufacturers are the dominant players in this market and sell drugs at exorbitant prices, while Indian drug manufacturers sell the same products at one-tenth of these levels.
COMPACT SEGMENTS
A second auto industry executive said that although Mexico is a major automotive hub, it is dependent on imports of passenger vehicles, especially in the subcompact and compact segments, due to intra-industry trade.
Mexico produces approximately 4 million vehicles each year, and 3.5 million of them are sent abroad. 64% of Mexico’s annual domestic passenger vehicle sales of 1.5 million are imported, while the rest is produced locally.
“The proposed tariff increase is expected to have a direct impact on India’s automobile exports to Mexico, especially for OEMs exporting fully built passenger vehicle units (CBUs),” the executive said.
Mexico has proposed increasing tariffs on passenger vehicle imports to 50% from 20% currently. Similarly, tariffs on two-wheelers are expected to increase from 15% to 35%. Tariffs on auto parts are expected to increase from the current 0-35% to 10-50% across categories.
The new tariff bill is expected to be passed by the Mexican Parliament and could come into force from January, senior industry executives told ET.
COST COMPETITIVENESS
Many Indian auto parts manufacturers have subsidiaries in Mexico.
“A lot of the back-end work in making auto components happens in India. These are then shipped for use by both automakers in Mexico and value-added component makers, who then ship them to the US. Mexico is not only a major export market for Indian auto component manufacturers, but also benefits from the cost competitiveness we offer,” said a components industry executive.
Auto parts and pharmaceutical companies, meanwhile, were surprised by Mexico’s move to raise tariffs.
A senior pharmaceutical industry executive said that in the last few months, officials from Mexican regulatory agencies have been visiting the Indian government and holding talks and considering ways for Indian companies to accelerate drug launches in Mexico.
“This new move on tariffs is contrary to these positive steps. Authorities invited Indian companies to set up production bases in special economic zones in Mexico, but no tariffs were discussed,” the person said.
Almost all major pharmaceutical manufacturers such as Sun Pharma, Dr Reddy’s, Glenmark and Hetero have operations in Mexico.
Indian drugmakers currently hold a small share of Mexico’s $20 billion pharmaceutical market. Approximately $338 million worth of medicines were imported by Mexico from India during 2024-25; This figure corresponds to the country’s total imported drug value of 8-9 billion dollars.
