Trump’s Auto Tariff: US President Donald Trump has announced a 25% Traffic On imported cars and light trucks, causing a sharp decline in auto stocks. Tata Motors and Samvardhana Motherson were among the biggest losers in early trading with their shares falling up to 7.5%. This move is expected to impact automobile prices and disrupt supply chains globally.

Following Trump’s announcement, Tata Motors’ stock fell by 6.65% to ₹661.10 per share on the NSE while Samvardhana Motherson’s stock declined by 7.5% to ₹124.73 per share. Other auto-related stocks also saw losses. Sona BLW Precision dropped 4.63% and Bharat Forge declined by 3%. The NIFTY AUTO index fell by 1.38% with most of its constituents in the red.

Trump justified the tariff increase as a way to boost domestic manufacturing and generate revenue for tax cuts. The tariffs are set to take effect from April 3.

Tata Motors’ Dependence on the US Market

Tata Motors’ subsidiary Jaguar Land Rover (JLR) relies heavily on the US market. Nearly one third of JLR’s sales in 2024 came from North America with 22% specifically from the US. The company’s management has reiterated its commitment to meeting financial targets despite these challenges.

Tata Motors had recently reported that JLR was on track to achieve its fourth-quarter EBIT margin of 10% and expected to be net debt free by the end of the fiscal year. The company remains confident in its FY25 guidance projecting revenue of £29 billion, an EBIT margin of at least 8.5% and a free cash flow of £1.3 billion.

Samvardhana Motherson who is a key auto component supplier also faces risks due to its exposure to the US market. Around 18% of its revenue comes from the US. 4% is from Mexico. The company produces a variety of automobile components including bumpers, wiring harnesses and mirrors.

Despite reporting a consolidated net profit of ₹879 crore in Q3 FY24, analysts believe weaker global car sales could impact its profitability. The company’s major clients include Maruti Suzuki, Mercedes-Benz, Volkswagen, Audi and BMW.Trump’s Auto Tariff Broader Impact on the Auto Industry

The tariff hike could have widespread effects on Indian and global automakers. Companies like Eicher Motors and Sona BLW which have significant exports to the US may face pressure. Sona BLW which derives 66% of its revenue from the US and Europe has already started diversifying its exports. It’s mainly to China, Japan and South Korea to mitigate risks.

With the US and Europe being among the largest importers of auto components, this tariff decision could disrupt trade worth billions of dollars. The full impact of these changes will depend on how automakers and suppliers adjust their strategies in the coming months.

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