The auto sector is under pressure today and Tata Motors is down over 5% after US President Donald Trump unveiled 25% tariff on imported cars and light trucks starting next week. The Nifty Auto Index is trading nearly 1% lower at 11:15 am. The stocks that have seen big impact include Tata Motors, down nearly 6%, Motherson Sumi down over 4%. Ashok Leyland and Bharat Forge are down 2% each as of 11:15 am.
Why is Tata Motors under severe selling pressure?
“What we’re going to be doing is a 25% tariff for all cars that are not made in the United States,” Trump said at an event in the US Oval Office in Washington last evening. According to a Reuters report, European Commission President Ursula von der Leyen described the move as “bad for businesses, worse for consumers.”
Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments explained that, “Trump’s latest decision to impose a 25% duty on all car imports to the US will impact Tata Motors which exports a significant chunk of JLR cars to the US.”
Mrunmayee Jogalekar, Auto and FMCG Research Analyst, Asit C Mehta Investment pointed out that the “The US is not a significant export destination for India’s vehicle exports. However, Tata Motors could face an impact due to its subsidiary, Jaguar Land Rover (JLR), which derives over 30% of its sales volume from the US market in 9MFY25. With no manufacturing facility in the US, all JLR vehicles will be subject to tariffs, which could impact pricing and profitability.”
USMCA-compliant automobile parts to be tariff-free for now
Interestingly, Trump’s directive included temporary exemptions for auto parts while government officials sort through the complexities of turning his proclamation into practice.
“USMCA-compliant automobile parts will remain tariff-free until the Secretary of Commerce, in consultation with U.S. Customs and Border Protection (CBP), establishes a process to apply tariffs to their non-U.S. content,” White House principal deputy press secretary Harrison Fields said on X.
It further exempts until May 3 all other auto parts imports.
JLR Exports to US
As per the latest report, JLR’s Q3 sales volume to North American markets increases 44% YoY. Retail sales of 106,334 units in the third quarter (including the Chery Jaguar Land Rover China JV) were down 3% compared to Q3 FY24 and up 3% compared to Q2 FY25. Retail sales for the financial year to date were 320,622, up 1% compared to the prior year. Just to clarify for the readers, JLR’s US exports are not manufactured in India at all.
(Inputs from Reuters)