Auto stocks witnessed a sharp decline of up to 7% during early trade on Thursday, with Tata Motors and Samvardhana Motherson International leading the slump. The downturn comes in the wake of former US President Donald Trump’s decision to impose a hefty 25% tariff on car imports to the United States, a move expected to severely impact several domestic auto companies, including India’s Tata Motors, which exports Jaguar Land Rover (JLR) vehicles to the US market.
Market Impact and Top Losers( auto sector)
Samvardhana Motherson International, which operates extensively in Europe, faced a significant blow, with its stock plunging by 7% to hit a day’s low of Rs 124.73 on the NSE. Meanwhile, the Nifty Auto index dropped 1.6%, settling at 21,385 points. Among the 15 auto stocks on the index, 14 traded in the red while only one showed marginal gains.
Prominent decliners included Bharat Forge, Ashok Leyland, Balkrishna Industries, Eicher Motors, Bajaj Auto, Apollo Tyres, MRF, TVS Motor Company, Mahindra & Mahindra, Maruti Suzuki, and Hero MotoCorp, with losses ranging from 0.2% to 3%. Exide Industries was the sole gainer in early trade.
Expert Opinions and Market Sentiment
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, expressed concern over the broader market sentiment. “Trump’s latest decision to impose a 25% duty on car imports will significantly impact Tata Motors due to its substantial export of JLR vehicles to the US. As the reciprocal tariff day approaches, market sentiment has turned cautious,” he noted.
He further added that while Foreign Institutional Investors (FIIs) appear less worried about the tariff hike, Domestic Institutional Investors (DIIs) are maintaining a cautious approach.
Broader Economic Context
A White House official clarified that the 25% tariff will apply not only to automobiles but also to auto parts, in addition to other duties and fees. Furthermore, light trucks, which are already subject to a 25% tariff, will face an additional 25% duty. The revenue generated from these tariffs is intended to support tax cuts for American companies.
The official emphasized the policy’s goal of shifting the United States from being a mere assembly hub for foreign parts to restoring its manufacturing prowess. Notably, no exemptions will be granted to other countries from these auto tariffs.
As market participants grapple with the implications of this policy shift, the automotive sector remains on high alert for further developments.
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