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Auto & auto parts makers like Tata Motors, Eicher, Sona BLW brace for Trump’s 25% tariff on foreign car imports, impacting margins.
Global automakers are likely to pass on some of the price escalation to component makers, putting pressure on their margins
Auto Stocks In Focus: Certain auto and auto component stocks are expected to be in focus today as investors analyze the implications of US President Donald Trump’s decision to impose a 25 per cent tariff on all foreign auto imports.
While India’s direct exports of fully assembled vehicles to the US are minimal, auto component manufacturers with significant overseas exposure could bear the brunt. Companies likely to be affected include Tata Motors and Eicher Motors, along with auto parts makers such as Sona BLW and Samvardhana Motherson, which primarily export to Europe and key Asian markets that supply vehicles to the US
With global automakers expected to pass on the cost increases to suppliers, margins for component manufacturers could be squeezed. In FY24, India’s auto component exports totaled $21.2 billion, while the global trade in auto components stood at $1.2 trillion. Exports to the US and Europe accounted for roughly 4.5 per cent of global auto component trade.
How Will Companies Be Affected?
Tata Motors: While Tata Motors does not directly export to the US, its subsidiary Jaguar Land Rover (JLR) has a significant market presence there, with the US contributing 22 per cent of JLR’s total sales. JLR’s vehicles, primarily manufactured in the UK and other global facilities, will now face the 25 per cent tariff.
Eicher Motors: The maker of Royal Enfield motorcycles may also experience some impact, as the US remains a key export market for its 650cc models.
Auto Component Makers Face Margin Pressure
With rising tariffs, global automakers are expected to shift part of the burden onto component suppliers, which will impact profitability.
Sona BLW Precision Forgings: Sona Comstar derives nearly 66 per cent of its revenue from the US and European markets. To reduce dependence on Western markets, the company has been expanding its footprint in China, Japan, and South Korea, aiming for these regions to contribute over 50 per cent of revenue in the coming years.
Samvardhana Motherson International (SAMIL): As one of India’s largest auto component manufacturers, Motherson supplies parts to major US carmakers like Tesla and Ford. However, its local manufacturing presence in the US and Europe reduces its vulnerability compared to component makers reliant on exports.
Other key players to watch include Bharat Forge, Sansera Engineering, Suprajit Engineering, and Balkrishna Industries, all of which have considerable export exposure.
