Tata Motors, Motherson Sumi Drop Up to 7.5% on Fears of Trump’s 25% Auto Tariff

Indian auto stocks took a hard hit on Wednesday after former U.S. President Donald Trump, who's leading the Republican race, promised a steep 25% tariff on all foreign-made cars if he wins the election. That bold statement rattled global auto markets and sparked a sharp sell-off in Indian companies that depend heavily on U.S. exports.

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Tata Motors shares, which owns Jaguar Land Rover (JLR), led the losses—its stock tumbled as much as 7.5% during the day and eventually closed 6.9% down at ₹915 on the NSE. That drop wiped out nearly ₹12,000 crore in market value. Why the panic? The U.S. is a major revenue stream for JLR, accounting for more than 20% of its sales, and new tariffs could seriously dent profits.

It wasn’t just Tata Motors share price, Samvardhana Motherson International, a major auto parts supplier to global carmakers, fell 6.4%. Bharat Forge, which provides parts to U.S. automakers and Tier-1 suppliers, slipped 4.9%. Others in the auto parts space, like Endurance Technologies and Sundram Fasteners, also dropped between 3% and 5%, with investors worried about tighter margins and disrupted exports.

Bajaj Auto, Apollo Tyres, Exide Industries, and Mahindra & Mahindra (M&M) also saw their shares drop between 1.5% and 2.5%. It’s clear the entire automobile sector is feeling jittery, with investors staying cautious and watching closely for any ripple effects.

On a more stable note, Maruti Suzuki and Hero MotoCorp held up a bit better. Their stock dipped just slightly, around 0.6% and 0.9%. These two have less exposure to the U.S. market than some of their competitors, but even so, the ongoing uncertainty in global trade continues to weigh things down.

Trump’s Trade Talk Sends Shockwaves

This all began after Trump doubled down on his protectionist stance during his campaign event in Michigan. He has vowed to "protect American jobs" by slapping a 25% tariff on any car not made in the U.S. He has also accused foreign automakers of exploiting American workers and promised his followers to rewrite trade deals to favor U.S. manufacturers.

His words have been blunt: “If a car is made in Mexico, China, India, or anywhere else and shipped into the United States, we will slap a 25% tariff on it — no exceptions.”

The announcement rattled not just Indian companies, but also global automakers from Germany, Japan, and South Korea. Analysts fear that such a move could disrupt global supply chains, reduce exports to the U.S., and prompt retaliatory tariffs from other countries.

Impact on Indian Exporters

Indian companies like Tata Motors and Motherson Sumi have made significant inroads into global markets, particularly in North America. While Tata Motors manufactures most JLR vehicles in the UK and Europe, any tariff on non-U.S. production could significantly reduce competitiveness and pressure margins.

“Motherson Sumi generates over 35% of its revenue from North America. A 25% tariff, if imposed, would not only raise costs for customers but could also lead to order reallocation to U.S.-based suppliers,” said Deepak Jaswal, an auto analyst at a Mumbai-based brokerage.

Bharat Forge, which exports high-margin components to U.S. truck and SUV manufacturers, may also see a slowdown in orders or be forced to absorb part of the tariff impact.

Street Turns Cautious

Brokerages have turned cautious on Indian auto exporters following the announcement. Jefferies downgraded Tata Motors to “Hold” from “Buy,” citing heightened regulatory risk and global demand uncertainty. Nomura said the move, if implemented, could be a “game-changer” for Indian OEMs and suppliers reliant on U.S. exports.

While the tariff threat remains contingent on Trump winning the 2024 presidential election and passing the measure through Congress, the market has begun pricing in the risk.

Outlook

With the global auto supply chain already grappling with high interest rates, slowing EV demand, and inflationary pressures, the prospect of a new U.S. auto tariff regime adds another layer of uncertainty for Indian players. Market participants will closely track developments in the U.S. presidential race and any follow-up from the Biden administration or trade allies.

Until clarity emerges, volatility in Indian auto and auto ancillary stocks is expected to persist.