Auto component giant Samvardhana Motherson International Ltd (SAMIL) has sought to calm investor concerns after its stock dropped 2.22% to ₹132 on March 27 amid a broader selloff in automobile and auto component stocks. The decline comes as fears mount over former U.S. President Donald Trump’s proposal for a 25% tariff on foreign car imports, a move that could significantly impact India’s auto industry and its exports.
With tariff collections set to begin on April 3, the auto sector is bracing for potential supply chain disruptions, cost escalations, and margin pressures. However, SAMIL reassured stakeholders that a large portion of its U.S. operations are either manufactured domestically or qualify under the US-Mexico-Canada Agreement (USMCA), thereby reducing its exposure to the proposed tariffs.
SAMIL’s Strategic Positioning in the U.S. Market
Despite the turmoil in auto stocks, SAMIL has emphasized that its localized manufacturing presence in the U.S. and Europe provides a significant buffer against import duties. Unlike other auto component manufacturers that depend heavily on exports to the U.S., SAMIL has built strong local capacities, reducing its reliance on overseas supply chains.
In a regulatory filing, SAMIL assured investors that it does not expect a “material impact” from the tariffs, as it continues to expand its local production capabilities.
Key Insights from SAMIL’s Statement:
Significant U.S. presence helps mitigate potential tariff risks.
Manufacturing footprint in Europe further reduces exposure to Trump’s policies.
USMCA agreement coverage offers a competitive advantage over exporters reliant on direct shipments.
Auto Stocks Under Pressure Amid Tariff Concerns
The broader automobile sector witnessed heavy selling pressure on March 27, as investors reacted to the potential cost increases and supply chain challenges that could arise if tariffs are imposed.
SAMIL’s stock declined 2.22% to ₹132.
Tata Motors and Sona BLW Precision Forgings fell as much as 7%.
The Nifty Auto Index also recorded sharp declines, reflecting the market’s concerns over future profitability.
With many Indian auto component makers relying on exports, the threat of higher tariffs on imported vehicles is seen as a major headwind for the sector. Investors fear that if companies cannot pass on additional costs to customers, they may have to absorb margin pressures, leading to lower profitability.
Analysts Offer Mixed Views on SAMIL’s Growth Outlook
Despite market volatility, brokerage firm CLSA has maintained an ‘outperform’ rating on SAMIL, setting a price target of ₹167, which represents a 23% upside from its current levels. The firm projects that SAMIL’s revenue will grow at an 11% CAGR between FY25-27, reaching $16 billion by FY27, with EBITDA margins at 9.5%.
However, analysts remain cautious about the short-term impact of the tariff policy.
“Companies with significant exposure to the U.S. auto market could face profit margin pressures,” said Shridhar Kallani, Research Auto Analyst at Axis Securities. “Tariffs will drive up costs, and if firms cannot pass these costs onto consumers, they may have to cut operational expenses or explore alternative revenue streams.”
CLSA’s Growth Projections for SAMIL:
Revenue expected to reach $16 billion by FY27.
EBITDA margins projected at 9.5%, maintaining steady profitability.
Stock price target of ₹167, suggesting a 23% potential upside.
Auto Industry at a Pivotal Moment
The Indian auto industry is now at a crucial crossroads, as Trump’s proposed tariffs could reshape global trade dynamics. Automakers and suppliers will need to reassess supply chains and make strategic decisions about whether to absorb higher costs, pass them on to consumers, or ramp up local manufacturing.
The potential cost burden of tariffs has already impacted sentiment, with SAMIL’s stock down 16% year-to-date. Auto giants like Tata Motors and Sona BLW Precision Forgings have also seen sharp corrections, reflecting investor worries about long-term profitability.
Industry Challenges Ahead:
April 3 marks the start of tariff collections, setting the stage for potential supply chain shifts.
Auto manufacturers must decide how to handle cost pressures—whether to absorb them or pass them to consumers.
Global trade relationships could be reshaped if tariffs escalate, leading to long-term industry adjustments.
Stock Performance and Market Sentiment
On Friday, March 29, SAMIL’s shares closed at ₹131, slipping an additional 0.72% from the previous session on the National Stock Exchange (NSE).
With rising tariff risks, investors continue to weigh SAMIL’s strong fundamentals against the broader macroeconomic uncertainties. As the April 3 deadline approaches, all eyes will be on how global automakers and suppliers adjust their strategies to navigate the evolving trade landscape.
