Auto street set for rough ride

India calculating impact of 25% duty on cars, auto parts; firms see hit on margins

- SOHINI DAS, SHREYA NANDI & DEEPAK PATEL

In a latest twist in the trade war, United States President Donald Trump has announced a sweeping 25 per cent tariff on automobile and automobile parts with effect from April 3.

While the European Union (EU) and Japan, among others, are gearing up for retaliation, India is doing its own math to calculate the impact of the additional tariff. In India, even as the impact on completely built vehicles may not see a major impact, auto components exports may take a hit, according to the government's preliminary analysis.

"Looks like automobiles exports may not take a major hit since Indian carmakers don't cater to the US market," a senior official said. However, that's not the case for automobile component exports.

Industry representatives and analysts shared the view. The operating margins of Indian automobile component exporters would likely compress by 125-150 basis points due to the Trump administration's decision, according to market analysts. Their operating margins are now in the range of 12-12.5 per cent.

The share prices of major auto component makers fell sharply on Thursday. Sona BLW Precision Forgings dropped 5.89 per cent to ₹467.15, while Samvardhana Motherson International fell 2.62 per cent to ₹131.4. Tata Motors also saw a 5.47 per cent drop, closing at ₹669.5.

The US is a key market for Jaguar Land Rover (JLR), Tata Motors' luxury car unit. North America accounted for nearly one-third of JLR's global sales in 2024, with the US alone contributing 22 per cent.

JLR had predicted in its Q3 earnings call that the market would become both challenging and unpredictable. Richard Molyneux, Chief Financial Officer of JLR, had said tariffs and a progressive breakdown of global free trade were a concern. While most Indian carmakers, except Tata Motors, have limited exports to the US, the scenario is starkly different for auto component manufacturers. For them, the US has been the number one export market for many years.