Tata Motors Falls 6% as CLSA Downgrades on JLR Exposure to Trump’s Auto Tariffs

Tata Motors’ stock suffered a sharp fall on April 4, plunging nearly 6 percent after global brokerage firm CLSA downgraded its rating on the company and slashed its target price, citing concerns around Jaguar Land Rover’s (JLR) future performance amid the looming threat of 25 percent US auto tariffs. The stock closed at Rs 615.3, down 5.9 percent on the Bombay Stock Exchange (BSE).

The tariff concerns come at a time when the global automobile industry is already grappling with softening demand, supply chain rebalancing, and inflationary pressure on input costs.

CLSA Slashes Rating and Price Target Amid JLR Risks

In its latest report, CLSA cut Tata Motors’ stock to ‘Outperform’ from ‘High Conviction Outperform’, citing structural growth headwinds in the company’s luxury car unit, Jaguar Land Rover, as its biggest vulnerability. The brokerage also lowered its target price to Rs 765 per share, down from Rs 930, reflecting a more cautious stance on the company’s medium-term outlook.

The downgrade was primarily driven by growing fears around US President Donald Trump’s proposed 25% tariff on all imported automobiles, which would significantly affect JLR’s US business. The American market contributed 23 percent of JLR’s total global sales in FY24, highlighting its dependence on that region.

CLSA projects that JLR volumes could decline by 14% year-on-year by FY26, if the tariffs are fully implemented and not offset by strong demand elsewhere. Additionally, the brokerage has cut FY26 EBITDA estimates by 15 percent, forecasting EBIT margins to fall to 7 percent in FY26/27, compared to 9 percent expected in FY25.

Highlights:

• CLSA downgrades Tata Motors to ‘Outperform’ from ‘High Conviction Outperform’

• Target price cut from Rs 930 to Rs 765 per share

• 14% projected drop in JLR volumes by FY26 if tariffs are sustained

• US accounts for over 20% of JLR’s global revenue

Tata Motors’ Long-Term Strategy Faces Near-Term Pressure

Although JLR is expected to remain free cash flow positive, the need to offset revenue loss from tariffs through price increases and cost rationalization may not yield quick results. Analysts believe short-term earnings will remain under pressure, with potential margin compression and a hit to investor sentiment.

Nirav Karkera, Head of Research at Fisdom, stated, “The US alone contributed over a fifth of JLR’s total revenue last year, making it a crucial market. With limited options to maintain margins and meet prior guidance, JLR will likely resort to price hikes and cost efficiencies. However, these strategies won’t yield immediate results.”

Tata Motors’ domestic commercial vehicle (CV) segment, meanwhile, is seeing a bottoming-out cycle expected to reverse by FY26. CLSA highlighted that rolling forward CV valuations to FY28 adds about Rs 127 per share in value, which may cushion the stock somewhat from downside pressure. However, that potential upswing may not be enough to neutralize near-term headwinds from the global luxury segment.

Highlights:

• Short-term margin hit expected from JLR’s US exposure

• Price hikes and cost control may not deliver immediate offset

• Domestic CV cycle could provide long-term support from FY26 onwards

Stock Underperformance Continues Despite Broader Market Gains

Over the past 12 months, Tata Motors shares have underperformed significantly, falling around 40 percent, while benchmark index Nifty 50 gained roughly 2 percent during the same period. The fall reflects not only JLR-related concerns but also broader worries about elevated input costs, global slowdown risks, and sectoral disruptions.

With the new auto tariff structure from the US coming into force from May 3, and uncertainty around further retaliatory measures by the UK, EU, and China, Tata Motors may continue to face volatility in its global operations, particularly in JLR’s North American and European markets.

Highlights:

• Tata Motors stock down 40% YoY; Nifty up 2% in same period

• High volatility expected as tariffs and counter-tariffs roll out

• Global macroeconomic risks weigh heavily on investor confidence

As geopolitical uncertainties escalate and policy changes reshape trade and demand dynamics, Tata Motors’ near-term outlook remains challenged, particularly through the lens of its international luxury car business.