US Tariffs Impact Indian Auto Sector

Following the announcement of a 25% import tariff by the US on key automobile components, effective May 2025, Indian auto and ancillary stocks experienced significant selling pressure. Tata Motors, which exports over 20% of its Jaguar-Land Rover cars to the US, saw its shares plummet by 5.6%, marking the steepest decline in Thursday's trading session.

Wider Market Reactions

Other notable losers included Sundaram Fasteners, down by 4%, Ashok Leyland, which fell nearly 3%, and Samvardhana Motherson, dropping 2.2%. The tariff imposition is expected to squeeze operating margins of Indian component manufacturer-exporters by 125-150 basis points, assuming full tariff absorption.

Export Revenue at Risk

With about a fifth of India’s auto component sector revenue derived from exports, and 27% of that from the US market alone, the impact is significant. Indirect suppliers to the US market through tier 1 suppliers or OEMs in other countries will also face profitability challenges.

Market Sentiments and Future Outlook

Despite the downturn in auto stocks, the broader market showed resilience. The BSE’s auto index closed 1% lower, while the Sensex gained 318 points, continuing its upward trend. Market analysts remain cautious, citing potential trade war impacts on US economic growth and inflation as key concerns moving forward.