Indian auto stocks plummeted on Friday following the US decision to impose a 25 percent reciprocal tariff on imported automobiles and auto parts. The Nifty Auto index dropped nearly 3 percent, with Bharat Forge leading the losses, falling 9 percent to a one-month low.
Bharat Forge Faces Revenue Threat
Bharat Forge, which supplies components for US Class 8 trucks, is heavily exposed to the American market. Chairman Baba Kalyani highlighted that nearly 20 percent of the companys exports are US-bound, raising serious concerns about the revenue impact due to higher tariffs.
Tata Motors and JLR Also Hit
Tata Motors, which owns Jaguar Land Rover (JLR), saw its shares drop over 6 percent. The US accounted for 23 percent of JLRs global sales in FY24, making it especially vulnerable to the tariff hike. The new duties may lead to increased costs and reduced demand for luxury vehicles.
Auto Component Makers Feel the Heat
The selloff spread across the sector, impacting even domestically focused companies. Maruti Suzuki and Mahindra & Mahindra declined by over 2 percent. Meanwhile, component manufacturers like Sona BLW Precision and Samvardhana Motherson dropped more than 5 percent each.
Broader Concerns for Indian Exporters
According to Arun Agarwal from Kotak Securities, the US has applied 25 percent tariffs on cars, light trucks, and around 150 auto parts sourced from outside North America. This is likely to increase prices in the US and squeeze margins for suppliers if they are forced to absorb some of the added cost.
Market Strategy Under Stress
Jefferies and other brokerages have warned that companies with large US exposure will continue to face headwinds. Vaibhav Porwal, Co-Founder of Dezerv, noted that export-driven sectors like auto components and IT face mounting challenges. He added that stock market gains in this environment would favor selective stock-picking strategies over broad-based investments.
Conclusion
As tariff battles escalate, Indian automakers must brace for prolonged uncertainty and shrinking profits. Companies with a global footprint are now re-evaluating their market strategies to withstand the impact of trade disruptions.
