'Indian auto sector looks promising...': Expert on investing in domestic auto stocks

The Nifty Auto Index has experienced a significant decline of almost 28% since reaching its peak in September 2024. This downturn can be attributed to a combination of factors such as US tariff worries, a decrease in automobile demand, and a general market correction. Consequently, the majority of auto stocks have witnessed notable declines.

Within the industry, Hero MotoCorp has been notably impacted, with its stock price plummeting by 37% over the last half-year. Likewise, Tata Motors has also suffered a considerable decline of 33%, leading to a substantial reduction in valuations.

Expert and seasoned investor Advait Arora, in a post on social media platform X, noted the Indian auto sector's future appears promising, with significant transformative shifts on the horizon. He added that investors with a long-term perspective should focus on top-performing companies, which are likely to drive growth and innovation in the Indian auto sector in the coming years.

"The future of the Indian auto sector looks promising, & full of transformational shifts. Investors with a long-term horizon should keep their eyes on quality leaders across all segments.
🔹 Car Makers: Tata, Maruti Suzuki, M&M
🔹 Two-Wheelers: Bajaj, Hero, TVS, Royal Enfield
🔹 Tyre Makers: MRF, Apollo, CEAT, JK Tyre, BKT
🔹 CV Makers: Ashok Leyland, Tata, Eicher, Atul, Force Motors
🔹 Auto Components: Minda, Bosch, Motherson, Sona BLW, Schaeffler, Exide, Gabriel, JBM, Subros & more," he wrote on X. 

Trump tariffs and auto imports

US President Donald Trump's announcement of imposing 25% tariffs on auto imports had a noticeable effect on the stock prices of major automakers globally, including in India. Tata Motors, one of the leading players in the Indian auto industry, experienced a significant decline of over 6% in early trading. Despite this, industry experts believe that the impact of these tariffs on the Indian auto sector will be limited, though there may be some repercussions for the auto component industry.

Tata Motors, which exports a sizable portion of its JLR cars to the US, saw its stock price plummet by 6.58% on the BSE. Other major players in the Indian market, including Ashok Leyland, Mahindra & Mahindra, Bajaj Auto, and Apollo Tyres, also registered declines ranging from 1.41% to 4.60%.

The auto components and equipment sector also felt the effects of the tariffs, with companies like Sona Comstar and Samvardhana Motherson, key suppliers to companies like Tesla, witnessing drops in their share prices. Bharat Forge, another supplier to Tesla, also experienced a slight decline in its stock price. Despite these fluctuations, experts believe that the overall impact on the Indian auto industry will be relatively limited.

India and US tariff on auto industry

According to the latest annual industry performance report by the Automotive Component Manufacturers Association of India (ACMA), India experienced a 5.5% growth in auto components exports, reaching $21.2 billion, while imports increased by 3% to $20.9 billion.

The report highlights that the United States emerged as the leading export destination for Indian auto components, representing 27% of total exports. Specifically, total exports to North America, primarily the US, amounted to $6.79 billion, reflecting a 4.5% growth compared to the previous year.

According to data from Nomura, India accounted for only 3% of auto components imported by the US from outside North America in FY24, making it a relatively minor player in this market. In comparison, countries like Mexico, Japan, South Korea, and Canada were among the US' top auto import partners, with significantly higher percentages of imports.

According to Ajay Srivastava, the founder of the Global Trade Research Initiative (GTRI), India's passenger car exports to the US in 2024 amounted to only $8.9 million, which is just 0.13% of its total car exports of $6.98 billion. This minimal level of exposure indicates that any tariffs imposed will have a negligible impact on India's car export industry.

Auto stocks

However, shares of automobile manufacturers saw strong performance on April 1, 2025, outpacing the overall stock market. On Tuesday, the Nifty Auto index was trading 0.2% higher at 21,338.75, while the benchmark Nifty50 index fell by 0.9% or 221 points. The Nifty Auto index reached a high of 21,543.80, rising 1.1% during intraday trading.

This surge in the automobile and auto ancillary companies' index was driven by strong monthly auto sales updates for March 2025.