Tata Motors, Sona BLW, Bharat Forge, SAMIL: Impact of US tariff on auto majors

Auto stocks such as Tata Motors Ltd, Sona BLW Precision Forgings Ltd, Bharat Forge Ltd and Samvardhana Motherson International Ltd (SAMIL) witnessed sharp downsides today on worries the US tariff duty of 25 per cent on all imported cars and auto component may lead to potential derating on the counters. The tariffs would come into play on April 2. 

CLSA said Tata Motors, Bharat Forge Sona BLW and Samvardhana Motherson (SAMIL) in its coverage have exports linked to the US, either made in India or elsewhere. 

Unlike others, SAMIL has manufacturing facilities in the US including a larger one in Alabama, which could cater to demand from the US car manufacturers and therefore would see relatively lower impact. 

The foreign brokerage noted that close to 31 per cent of JLR's retail sales come from the US and that models are made in the UK. Tata Motors is,  thus, exposed to the higher duty. It noted that the US in the past has been a relatively lower-margin market for JLR. 

"Sona BLW derives 43 per cent of its revenue from the US and Bharat Forge 38 per cent, with products being made largely in India and not in the US," CLSA said.

CLSA said any price increase in the US market would lead to some softening of demand for cars as higher duty on imported components would result in cost escalation for made-in-US cars or direct increase in the price of imported vehicles. The below table shows the potential impact on valuation for the four India listed companies.

At 12 pm, shares of Tata Motors were trading 5.21 per cent lower at Rs 671.10. Sona BLW Precision Forgings Ltd was down 3.71 per cent at Rs 478. SAMIL declined 2.07 per cent to Rs 132.20.  Bharat Forge Ltd reversed early losses, and was up 1.16 per cent at Rs 1,196.

Nuvama said: "We remain constructive on the automotive sector and estimate tractors, SUVs and 2Ws would clock high single-digit growth over FY25–27E, outpacing CVs. Top picks: TVS Motor, M&M, Motherson Sumi, UNO Minda."

The global auto industry suffered a dip in volumes across segments in 2024. The outlook for CY25 is a mixed bag based on the expectations of 20-plus global entities, Nuvama said in another note.