Tata Motors and Samvardhana Motherson are the Worst Laggards as Auto Stocks Plummet up to 7%

Trump declares a 25% tax on automobiles built abroad: Early on Thursday, March 27, shares of automakers and auto-ancillary businesses, including Tata Motors and Samvardhana Motherson, were heavily pressured to sell.

As US President Donald Trump widened the global trade battle on Wednesday by announcing a 25% tax on imported vehicles and light trucks beginning next week, markets plummeted. Experts in the car sector predict that the move will increase costs and impede productivity.

During a meeting in the Oval Office, Trump declared, “What we’re going to be doing is a 25% tariff for all cars that are not made in the United States,” Shares of Samvardhana Motherson fell up to 7.5% to ₹124.73 each on the stock exchange after the revelation. In comparison, shares of Tata Motors fell as high as 6.65% to ₹661.10 apiece on the NSE.

Among other names, Bharat Forge was down almost 3% at ₹1,147.95 on the NSE, while Sona BLW Precision was down 4.63% at ₹473.95 each. There was a strain on the entire auto pack. Thirteen of the fifteen components were trading lower when the NIFTY AUTO index was last observed, trading 1.38% lower at 21,442.25 levels.

Trump said collections would start on April 3, the day after he intends to announce reciprocal tariffs aimed at the nations that bear most of the US trade deficit. According to a Reuters report, Trump views tariffs as a tool to raise revenue to offset his promised tax cuts and revitalize a long-declining US industrial base.

Given that the US is the primary market for its flagship firm, Jaguar Land Rover (JLR), Tata Motors is under the spotlight. Nearly one-third of its sales in 2024 came from North America, mainly from the US, according to a report by CNBC-TV 18. According to JLR’s fiscal year 2024 annual report, the US market accounted for 22% of its total sales.

The management of Tata Motors has reaffirmed that JLR will be net debt-free by the end of the current fiscal year and fulfill its fourth-quarter forecast of 10% EBIT margins.

During its analyst meeting earlier this month, Tata Motors emphasized the North American market’s sustained strength. The UK and EU, which have so far remained quiet, have also begun to show indications of progress. According to the company, JLR has been comparatively outperforming its competitors, even if the demand situation in China is still difficult.

Given that Range Rover’s variable marketing expense (VME) is still low at 2-2.3%, the business anticipates that VME spending will decline as Jaguar sales decline. However, because labor and repairs are more expensive in the US, which is now JLR’s largest market, warranty costs could continue to be high.

Overall, the business is still optimistic about reaching its FY25 projections, which include £29 billion in revenue, an EBIT margin of >=8.5%, and £1.3 billion in free cash flow. According to JM Financial’s research, “The company has maintained its guidance of turning net cash positive during FY25, even though Capex is expected to peak in FY25/26.”

According to recent news sources, Samvardhana Motherson, one of the top brands in the auto components industry, would continue to face pressure on its stock due to sluggish global car sales.

Additionally, studies state that the United States accounts for around 18% of Motherson’s revenue, while Mexico accounts for 4%. About half of Samvardhana Motherson’s sales come from bumpers, with the other portion coming from wire harnesses, dashboard and door panels, rearview mirrors, and sunroofs.

For the quarter that concluded on December 31, 2024, the firm reported a combined net profit of ₹879 crore. In the same quarter of the prior fiscal year, the amount was ₹542 crore. Analysts claim the profit was lower than anticipated because of poor worldwide auto sales.

Based on market capitalization, Samvardhana Motherson is the top manufacturer of car components in India. Mercedes-Benz, Volkswagen, Audi, BMW, and Maruti Suzuki are a few of its clients.