US President Donald Trump has dealt a significant blow to automobile companies by announcing a 25% tariff on all foreign car imports, set to take effect next week.
This decision is expected to impact both Indian automobile and auto component companies. Investors are now closely monitoring auto companies with direct or indirect ties to the US market.
Although the direct export of fully assembled vehicles from India to the US is limited, the impact on companies manufacturing auto components could be more significant.
Many of these companies export components to markets like Europe, Japan, South Korea, and China, which supply vehicles to the US.
Here are 8 companies likely to be affected:
Tata Motors
Tata Motors doesn’t directly export vehicles from India to the US, but its subsidiary Jaguar Land Rover (JLR) has a significant presence there, with 22% of its sales coming from the US.
In FY24, JLR sold around 400,000 units, a large portion of which went to the US. Most of JLR’s vehicles are made in the UK and other countries.
If the 25% tariff is applied, it could increase the price of JLR vehicles, potentially leading to lower sales and impacting Tata Motors.
Eicher Motors
Eicher Motors’ Royal Enfield motorcycles, especially the 650cc models, are very popular in the US.
The US is a key market for Royal Enfield, and the new tariff could raise bike prices, reducing demand in this market.
Impact on Auto Component Companies
Global automakers may pass on the tariff’s impact to component suppliers, which could squeeze the margins of these companies.
Sona BLW Precision Forgings
Sona BLW generates 66% of its revenue from the US and Europe. The company produces differential gears and starter motors, which are supplied to US automakers.
The tariff could raise the price of its products, leading to a drop in exports. To reduce its reliance on the US, Sona BLW is working to expand its exports to China, Japan, and South Korea.
Samvardhana Motherson International (SAMIL)
Motherson supplies components to major US automakers like Tesla and Ford.
However, it has set up manufacturing plants in the US and Europe, which could shield it somewhat from the tariffs. Despite this, competition may rise from other suppliers.
Other companies, such as Bharat Forge, Sansera Engineering, Suprajit Engineering, and Balkrishna Industries, which rely heavily on exports, could also face negative effects from the tariff.
