(representative image) India shipped goods worth $5.3 billion to Mexico in the last fiscal year, of which cars made up close to $1 billion, according to the letter and commercially available customs data.
| Photo Credit:
REUTERS/BHAWIKA CHHABRA

Mexico’s decision to raise tariffs as high as 50 per cent will affect $1 billion worth of shipments from major Indian car exporters, including Volkswagen and Hyundai, despite industry lobbying to persuade New Delhi to prevent such a move, according to two sources and a letter from an industry group reviewed by Reuters.

Mexican President Claudia Sheinbaum’s government approved on Wednesday raising import tariffs next year on hundreds of items from countries it does not have trade agreements with, including China and India, to protect local jobs and manufacturing.

But the move also comes amid US pressure on Mexico to curtail business with China, despite opposition from local business groups warning that higher tariffs will raise costs.

The import duty on cars will rise to 50 per cent from 20 per cent, dealing a significant blow to India’s largest vehicle exporters to Mexico including Volkswagen, Hyundai, Nissan and Maruti Suzuki.

MEXICO TARIFF RAISES RISK FOR INDIAN MANUFACTURING

The Society of Indian Automobile Manufacturers (SIAM), an industry group that counts VW, Hyundai and Suzuki among its members, had urged the commerce ministry in November to press Mexico to “maintain status quo” on tariffs for vehicles shipped from India, according to a copy of the letter.

“The proposed tariff hike is expected to have a direct impact on Indian automobile exports to Mexico…we seek Government of India’s support to kindly engage with the Mexican government,” the industry body said in its letter to the commerce ministry before the tariff was finalised.

Details of the letter are being reported for the first time. It was not immediately clear what steps the car makers, industry body and Indian government will take next.

The tariff hike could force automakers to reevaluate strategies reliant on Mexico, which is India’s third-largest car export market after South Africa and Saudi Arabia.

Car manufacturers in India have relied on exports to ensure production is maximised and there are economies of scale. Some also rely on exports to cushion slower domestic sales or improve margins — a business strategy that may need to be redrawn.

The tariff hike, which mirrors a rise in global tariffs, including levies championed by US President Donald Trump, could also complicate Prime Minister Narendra Modi’s efforts to market India as a low-cost manufacturing alternative to China.

Commerce Ministry, Society of Indian Automobile Manufacturers and the Mexican government did not respond to requests for comment.

Hyundai and Maruti Suzuki did not respond to requests for comment, while Nissan declined to comment.

Piyush Arora, chief of VW’s Indian unit, Skoda Auto Volkswagen, said India has been a strong export base for many years and the company ships to more than 40 countries from here.

“Mexico has consistently been one of our important export markets, given the rising demand there and the traction of our India-made models,” Arora said before the tariffs were approved.

VOLKSWAGEN MOST EXPOSED TO MEXICO TARIFFS ON INDIA

India shipped goods worth $5.3 billion to Mexico in the last fiscal year, of which cars made up close to $1 billion, according to the letter and commercially available customs data.

Skoda Auto accounts for nearly 50 per cent of India’s total car shipments to Mexico. Hyundai shipped cars worth $200 million, Nissan’s exports stood at $140 million and Suzuki’s at $120 million, the data showed.

In meetings with government officials last month, car makers said the majority of shipments from India to Mexico are compact cars with an engine size of less than one litre, which are designed for the Mexican market and not for further export to the U.S., one of the sources said.

“Indian-origin vehicles are not a threat to Mexican local industry as Indian vehicles do not cater to high-end segments manufactured by Mexico for serving the North American market,” the industry group said in its letter.

Car makers also told Indian officials that of the 1.5 million passenger vehicles sold in Mexico each year, about two-thirds are imported and India’s shipments make up “just about 6.7 percent” of the total sales, according to the first source and the letter.

Published on December 11, 2025

Despite some destination opacity — common for vessels transiting the Red Sea — current signals point toward Reliance Industries (RIL) pausing new Russian crude and fuel oil purchases amid rising sanctions and compliance pressures.
| Photo Credit:
YORUK ISIK

Select Indian refiners including a few state-controlled entities and Nayara Energy are back in the market contracting Russian crude oil as discounts on the flagship Urals grade from Moscow have widened to around $7 per barrel.

As per the global real time data and analytics provider Kpler, Urals discounts to Oman/ Dubai have widened to around $7 a barrel on a DES (Delivered Ex Ship) basis on India’s West Coast. Besides, discounts on the ESPO grade delivered to northeastern China have risen from around $2 premium to roughly $6 versus ICE Brent, it added.

According to the Finland-based Centre for Research on Energy and Clean Air (CREA), the discount on Urals grade narrowed by 4 per cent M-o-M in October 2025, averaging at $4.92 per barrel below Brent against an average discount of $5.13 per barrel in September.

According to refiners, analysts and traders large Indian refiners, including Nayara Energy, are buying more Russian crude oil from non-sanctioned entities as higher discounts are making the procurement economics compelling.

Sumit Ritolia, Kpler’s Lead Research Analyst for Refining & Modeling, told businessline, “As we flagged three weeks ago, most Indian refiners are adapting—not exiting—the Russian market. But reputational and financial risks remain high for large buyers, which is forcing Russian suppliers to widen discounts.”

However, Kpler’s latest tracking shows that no additional Russian crude cargoes are heading to Jamnagar after the Aqua Titan was discharged on December 17, he added.

Despite some destination opacity — common for vessels transiting the Red Sea — current signals point toward Reliance Industries (RIL) pausing new Russian crude and fuel oil purchases amid rising sanctions and compliance pressures.

Last month, RIL said that it stopped importing Russian crude oil into its SEZ refinery with effect from November 20. From December 1, all product exports from the SEZ refinery will be obtained from non-Russian crude oil. Besides, all pre-committed lightings of Russian oil are being honoured, with the final cargo loaded on November 12.

“Some uncertainty remains, as many tankers update destinations only shortly before arrival. However, even after adjusting for this structural opacity, the flow pattern clearly suggests a softening in RIL’s Russian intake,” Ritolia said.

If RIL remains on the sidelines, particularly after sanctions targeting Rosneft, its key term supplier, India’s Russian crude imports will likely ease from earlier highs. Other refiners, including Nayara and select public-sector players, may step in with opportunistic buying, but cannot fully offset Reliance’s swing capacity, he explained.

“We currently forecast India’s Russian crude imports stabilising around 1–1.2 million barrels per day (mb/d), consistent with our earlier view that flows could briefly soften toward 6,00,000–8,00,000 b/d before recovering into early 2026,” Ritolia anticipated.

Published on December 11, 2025

Seshadri Sen, Head of Research & Strategist, Emkay Global

Indian equities are poised for further gains over the next year, with Emkay Global Financial Services projecting the Nifty 50 to touch 29,000 by 2026. The forecast, presented in the firm’s latest India Strategy report, highlighted that valuations will likely stay elevated even as the market navigates pockets of near-term volatility.

The alignment of softer rates, improving consumption and stable policy direction creates a strong foundation for the country’s multi-year growth cycle, positioning the Nifty for meaningful upside through 2026, Nirav Sheth, CEO – Institutional Equities, Emkay Global, said.

The brokerage’s outlook is anchored in expectations of a broad consumption recovery beginning in the second half of FY26, enabled by GST 2.0–linked price cuts, income-tax relief and improving employment trends.

GST 2.0 boosts affordability and spur demand

Emkay noted that autos, durables and other discretionary categories stand to benefit meaningfully from improved affordability as the GST overhaul takes effect. The firm believed the recovery in demand, combined with a cyclical upturn in hiring, positions discretionary consumption as the strongest investment theme for 2026.

RBI’s liquidity push

Monetary easing is another critical pillar of the firm’s constructive stance. Emkay highlighted that the Reserve Bank of India’s aggressive liquidity infusion, along with recent repo-rate cuts, is expected to lower borrowing costs and revive retail lending. Retail credit is already showing signs of acceleration, while non-bank lenders continue to outpace banks in capturing demand.

Despite this, the firm remains cautious on large financial institutions, citing structural growth challenges, margin pressures and increased competition from PSU banks.

Capex cycle mixed, but government spending provides support

The report emphasized that India’s capex cycle will be mixed. While private-sector investments are expected to rise only modestly, government-led spending—particularly in railways, power, defence and renewables—continues to provide essential support. An anticipated India–US trade deal, though not time-bound, is seen as a macro catalyst with the potential to alleviate currency pressures and improve external stability.

Domestic flows strong even as FPIs turn net sellers

On market flows, Emkay noted that domestic mutual fund allocations to equities remain robust even as foreign portfolio investors have turned net sellers this year. The primary market, meanwhile, has stayed active with a strong pipeline of issuances, reflecting continued investor appetite at higher valuation levels.

The firm underscored that although large-cap stocks are well positioned to offer stability in a volatile environment, small- and mid-cap segments are better placed to generate alpha. SMID valuations, according to the brokerage, appear higher than those of Nifty constituents because they are concentrated in faster-growing sectors, unlike the index’s heavier exposure to lower-P/E industries such as financials and energy.

Seshadri Sen, Head of Research & Strategist, Emkay Global, emphasised that SMID valuations may appear elevated at first glance, but they remain largely justified given the significant differences in sector composition.

Sectorally, Emkay maintained an overweight stance on discretionary, industrials, healthcare and materials. Discretionary remained the top call, supported by improving demand visibility and GST-driven price tailwinds. The firm is underweight on financials, IT, staples and telecom, noting that large banks remain vulnerable to continued de-rating, while IT is expected to see a more meaningful cyclical recovery only as global technology spending normalises by 2026.

While acknowledging that India’s markets are trading at valuation levels above long-term averages, Emkay argued that sustained earnings improvement and a supportive macro backdrop justify the optimistic Nifty target. It concluded that the alignment of softer interest rates, rising consumption and continued policy stability provides a strong foundation for India’s next phase of growth.

Published on December 11, 2025