U.S. Auto Tariffs Impact: Tata Motors, Sona BLW, and Samvardhana Motherson Shares Decline

Shares of Tata Motors, Sona BLW Precision Forgings, and Samvardhana Motherson fell by up to 7 per cent on March 27 following the announcement of a 25 per cent tariff on foreign car imports to the United States. This led to broader declines across the auto sector, with the Nifty Auto index trading 1.5 per cent lower during the morning session.

Impact of U.S. Tariffs on Auto Component Makers

The newly imposed 25 per cent tariff by the U.S. government is expected to increase costs for global automakers. As a result, these companies may transfer some of the added expenses to auto component manufacturers, leading to potential margin compression. Auto component manufacturers with substantial export exposure, particularly to the U.S. and European markets, are anticipated to face the most significant effects.

India's auto component exports totalled $21.2 billion in FY24, while the global auto component market is valued at $1.2 trillion. The U.S. and Europe account for approximately 4.5 per cent of the total global auto component trade, making them critical markets for Indian manufacturers.

Company-Specific Impact

Tata Motors

Although Tata Motors does not directly export vehicles to the U.S., its subsidiary, Jaguar Land Rover (JLR), maintains a substantial presence in the American market. The U.S. accounted for 22 per cent of JLR's total sales in FY24, with approximately 400,000 units sold globally. JLR vehicles intended for the U.S. are produced in the UK and other international locations, subjecting them to the newly implemented 25 per cent tariff.

Eicher Motors

Eicher Motors, known for its Royal Enfield motorcycles, may also experience some impact. The U.S. is a key export destination for its 650cc motorcycles. Following the tariff announcement, the company's share price declined by approximately 1%.

Sona BLW Precision Forgings

Sona BLW Precision Forgings manufactures automotive systems and components, such as differential gears and starter motors. Around 66 per cent of the company's revenue is derived from the U.S. and European markets. To reduce dependency on these regions, the company has been diversifying its operations into China, Japan, and South Korea, with the goal of having Eastern markets contribute over 50 percent of revenue within five years.

Samvardhana Motherson International Ltd (SAMIL)

As one of India's largest auto component manufacturers, Samvardhana Motherson has a significant presence in the U.S. and Europe. The company supplies components to leading American automakers, including Tesla and Ford. Due to its established local manufacturing facilities in these regions, the company is less exposed to import tariffs than firms reliant on exports.

Other auto component manufacturers with U.S. market exposure, such as Bharat Forge, Sansera Engineering, Suprajit Engineering, and Balkrishna Industries, also experienced share price declines amid concerns over the tariffs' impact.

Summary

The U.S. government's decision to impose a 25 per cent tariff on foreign car imports is expected to increase costs for global automakers, which may be passed on to auto component manufacturers. Indian companies with high export exposure, including Tata Motors (via JLR), Eicher Motors, Sona BLW Precision Forgings, and Samvardhana Motherson, will likely face varying degrees of impact. While some companies have taken steps to diversify their markets and establish local manufacturing, the broader auto sector is experiencing pressure due to these new trade policies.