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Informist, Friday, Apr. 4, 2025

MUMBAI – Shares of automobile and auto-ancillary companies are likely to remain under pressure in the near-term due to worries about potential tariff-related losses; automobile component makers are likely to be affected the most. Last week, US President Donald Trump had imposed a 25% tariff on passenger vehicles and light trucks imported into the US as well as on certain automobile parts. These had led to huge-sell off of shares of auto-ancillary companies. Analysts said that Tata Motors is likely to be under pressure as the company's subsidiary Jaguar Land Rover derives nearly 22% sales from North America.

Analysts said that companies like Sona BLW Precision Forgings, Samwardhana Motherson and Balkrishna Forgings may be hit as they supply components to the original equipment manufacturers in the US. Sona BLW Precision derives 40-45% of revenue from US, followed by Balkrishna Industries, whose 30% of sales is based on the region. Apart from these, Bharat Forge also has to bear the brunt of the higher tariffs imposed by the US.         

On Friday, Morgan Stanley downgraded the rating of Bharat Forge to 'equalweight' from 'overweight' and cut the target price by 14% to INR 1,170. The company is expected to face near-term margin impact of 200 basis points due to the US tariffs, the brokerage said. It expects the 25-27% auto tariff burden to offset gains from the company's non-auto business. 

Meanwhile, overall exports of auto and auto components to the US are very low, and accordingly, the impact of reciprocal tariff is expected to be minimal for the sector as a whole, CareEdge Ratings said in a note. Additionally, auto component exports to the US are crucial for OEMs in the US, and it may take time for them to replace these with other lowcost, approved vendors from other nations, the ratings agency said. This improves India's ability to mitigate the impact of higher tariffs in the short to medium term, it said.

Friday, CLSA cut its rating on Tata Motors to "outperform" and trimmed the target price by nearly 18% to INR 765. The brokerage said the 25% US auto tariff and Jaguar model cuts might lead to a fall of 14% in volumes of its subsidiary Jaguar Land Rover in 2025-26 (Apr-Mar). CLSA also said that it sees JLR's earnings before interest and tax margin falling to 7% in FY26-FY27 from 9% in FY25. 

The Nifty Auto fell 3.3% this week and Friday closed at 20593.15 points. Meanwhile, the Nifty 50 was down 2.7% and the BSE Sensex was down 2.6%. Bharat Forge, Samvardhana Motherson, and Tata Motors fell the most among the total 15 stocks in the sectoral index.

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Following are the resistance and support levels for the stocks for next week as per calculations by Informist based on their prices on the National Stock Exchange:

End

US$1 = INR 86.23

Reported by Gopika Balasubramanium

Edited by Deepshikha Bhardwaj

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