The United States’ decision to impose a 25% tariff on imported cars and auto parts has sent shockwaves through the global automotive industry. While India is not a major exporter of passenger vehicles to the US, several Indian companies, particularly Tata Motors’ Jaguar Land Rover (JLR), Sona BLW Precision Forgings, Bharat Forge, and Samvardhana Motherson International (SAMIL), have significant exposure to the American market.
As tariff collections begin on April 3, 2025, Indian auto firms face a critical choice—whether to absorb the additional costs, increase vehicle prices, or shift production to the United States.
Tata Motors Faces Heavy Blow as JLR Takes Center Stage
Among Indian automakers, Tata Motors stands to lose the most due to its luxury vehicle subsidiary, Jaguar Land Rover (JLR). The UK-based brand sold over 400,000 units globally in FY24, with 23% of those sales coming from the US. Given the high tariff impact, maintaining profit margins in a competitive market like the US will be a major challenge.
Challenges for JLR:
The US contributes over a fifth of JLR’s total revenue, making it one of its most critical markets.
Passing on the cost to consumers through price hikes could lead to a decline in demand.
Absorbing the tariff could shrink operating margins—Morgan Stanley estimates a potential 200 basis-point hit on JLR’s EBIT margin.
Cost-cutting measures may not be enough to mitigate the full impact of tariffs.
Financial analysts believe that Tata Motors might be forced to explore manufacturing in the US to bypass the tariff in the long run, though this would require a significant capital investment.
Auto Component Makers Brace for Impact
Indian auto parts manufacturers with significant US exposure are also expected to face turbulence. Companies like Sona BLW Precision Forgings, Bharat Forge, and SAMIL depend on the US for a large portion of their revenue.
How Indian Auto Component Firms Are Affected:
Sona BLW Precision Forgings derives 43% of its revenue from the US, making it one of the most vulnerable Indian suppliers.
Bharat Forge generates 38% of its revenue from the American market, leaving it exposed to potential demand shocks.
SAMIL (Samvardhana Motherson International Limited) has a strategic advantage due to its manufacturing facility in Alabama, allowing it to continue operations without facing tariffs.
While Sona BLW and Bharat Forge are heavily reliant on exports from India, SAMIL is in a better position to navigate the new tariff structure through its US-based production units.
Stock Market Reaction: Auto Sector Takes a Hit
Following the announcement of the tariffs, investor sentiment turned negative, with Indian auto stocks experiencing significant losses.
Stock Performance on March 26, 2025 (1:55 PM IST):
Tata Motors plunged 5% due to concerns over JLR’s profitability.
Sona BLW tumbled 7%, reflecting the high revenue exposure to the US.
Bharat Forge shed 2%, showing moderate investor concern.
SAMIL dropped 3%, despite having a US facility as a buffer.
The Nifty Auto Index fell over 1%, mirroring overall weakness in the sector.
These losses indicate that investors anticipate significant headwinds for Indian automotive firms, especially those reliant on US exports.
Global Trade Dynamics: Repercussions Beyond India
The tariff shockwave extends beyond Indian firms, affecting global automakers and supply chains. Companies such as BMW, Mercedes-Benz, and Toyota, which export vehicles to the US, will also be impacted.
Broader Implications of the Tariff Hike:
European automakers could face even greater risks, as they have a higher export volume to the US than Indian firms.
China’s electric vehicle (EV) manufacturers, which have been aggressively expanding into the American market, may see a slowdown in growth.
Mexico could emerge as a manufacturing hub for global auto firms looking to avoid US import duties.
By implementing these tariffs, the Trump administration aims to boost domestic manufacturing, but industry experts warn that global supply chains will be disrupted, leading to price hikes for consumers.
What Are the Possible Responses from Indian Automakers?
To mitigate the impact of the tariffs, Indian companies are exploring different strategies.
Potential Strategies for Indian Auto Firms:
Shifting Production to the US
JLR may consider setting up a US plant, although this requires heavy investment and regulatory approvals.
Sona BLW and Bharat Forge might explore joint ventures or acquisitions to establish a local presence.
Price Adjustments & Cost Optimization
Companies could pass on the higher costs to consumers, though this carries the risk of declining sales.
Operational efficiency and supply chain optimizations may help reduce expenses.
Diversification into Other Markets
Sona BLW has already started diversifying into China, Japan, and South Korea to reduce its US reliance.
Indian auto firms could explore increasing exports to Europe and Southeast Asia as alternative revenue sources.
These approaches will be critical in determining how well Indian automakers can withstand the tariff challenge in the months ahead.
US Tariff Policy: Uncertainty for the Auto Industry
While Trump’s 25% tariff is aimed at boosting US manufacturing, its long-term impact on global trade and the Indian auto sector remains uncertain.
The tariffs may lead to higher car prices for American consumers.
Automakers may accelerate plans for local manufacturing in the US to sidestep duties.
India’s auto industry will need to rapidly adapt to the changing trade landscape to maintain competitiveness.
The coming months will be critical for Indian automakers, as they navigate one of the biggest trade disruptions in recent years.
