By Vikrant Rana and Huda Jafri
With the United States set to impose steep 50% tariffs on Indian auto-component exports from August 27, 2025 a move that could significantly disrupt trade flows, consultations are currently underway on a possible targeted support to protect and strengthen the sector, with the Ministry of Heavy Industries, in coordination with the Department of Science & Technology (DST) and the Commerce Ministry, exploring measures designed to:
- Boost Research & Development (R&D): Provide direct funding to auto-component manufacturers to support innovation, process improvements, and advanced engineering solutions, with an emphasis on high-value segments such as engine systems, transmission parts, and EV-related components.
- Enhance Intellectual Property (IP) Capabilities: Offer financial and technical support for patent filings, design registrations, technology transfers, and licensing agreements, ensuring Indian firms secure ownership over innovations and strengthen their global competitiveness.
- Facilitate Capex & Opex Support: Help businesses scale operations and modernize manufacturing capabilities to meet export market demands and quality benchmarks.
Funding Source & Structure
The initiative will likely tap into the Anusandhan National Research Foundation (ANRF), a ₹50,000 crore corpus planned for 2023-28 with ₹14,000 crore contributed by the central government and the remainder sourced from public sector undertakings, private entities, philanthropic institutions, and global donors.[1]
Market Impact & Challenges
In FY25, exports touched $22.9 billion, of which $7.35 billion were shipped to North America.[2] The US remains a crucial market, and the imposition of 50% tariffs could put nearly half of India’s US-bound exports estimated at $7 billion at risk[3].
Diversifying beyond the US is challenging, as only a limited number of countries have large-scale automotive manufacturing ecosystems. Compounding the challenge, a NITI Aayog report released in April 2025 highlighted that Indian manufacturers face a 10% cost disadvantage compared to China and recommended a combination of fiscal incentives, IP-led innovation, and export promotion measures[4].
Strategic IP Implications
For the IP ecosystem, this policy shift could be transformative:
- Increased Patent Filings: As R&D funding grows, more Indian firms are expected to develop patentable innovations in mechanical systems, EV technologies, and materials science.
- Licensing & Technology Transfer: Government-backed IP support could make Indian companies more attractive for cross-border licensing deals and joint ventures.
- Enforcement & Protection Needs: With more IP assets, companies will require robust enforcement strategies to protect against infringement in key export markets.
- Global Filing Strategies: Auto-component exporters may seek Patent Cooperation Treaty (PCT) filings to secure protection in multiple jurisdictions, especially in high-value markets like the US, EU, and Japan.
Industry Outlook
If implemented effectively, this R&D and IP support initiative could help Indian exporters not only weather the tariff shock but also pivot towards innovation-driven competitiveness, aligning with the government’s 2030 target of $145 billion in domestic production and $60 billion in exports.[5]
[2] https://www.deccanherald.com/business/auto-component-exports-jump-by-8-to-22-9-bn-in-fy25-3621184
[4] https://www.pib.gov.in/PressReleasePage.aspx?PRID=2121826