25% Tariff From April 2: Maruti, Bharat Forge, M&M, Bosch Shares Alert! Should Investors Worry In Auto Stocks?

Indian auto stocks traded on a mixed note on Thursday after Trump imposed a 25% tariff on imported cars and auto parts. Automobile giants like Motherson Sumi and Tata Motors are in deep red due to their exposure in the US. Experts believe that Trump's latest tariff would have minimal impact on Indian auto companies. Overall, the chances of low productivity and higher prices in the US market have also heightened due to the 25% tariff.

Auto Stocks:

Sensex and Nifty traded higher, however, their gains were limited due to sharp selling in auto stocks. Nifty Auto index plunged by 224.65 points or 1.03% to trade at 21,518.15. However, in the early trade, the index nosedived by at least 526.4 points.

The share prices of Tata Motors and Motherson Sumi plunged by 6% and 3%, respectively, making them top bears on exchanges. Also, stocks like Balkrishna Ind, Bharat Forge, Ashok Leyland, Exide, Apollo Tyre, and Eicher Motors also dipped by nearly 1% to 2.5%.

On the other hand, Hero MotoCorp surged by 2.4% to become the top gainer, followed by gains in TVS Motor, Maruti Suzuki, Bajaj Auto, and Bosch.

An industry executive told PTI on the condition of anonymity, that it is the Indian auto components industry that is more likely to face the heat due to the US tariff as exports from here to the US are significant. The expert added, "Indian vehicle makers are less likely to be impacted as there are no direct exports of fully built cars from India to the US."

Meanwhile, SBI Securities believes that a 25% import tariff on vehicles and auto components with effect from April 2, could impact Tata Motors, Motherson, Bharat Forge and Sona BLW, negatively in the medium to short term.

The latest Emkay Global report, which was a day before Trump's 25% tariff, said, "As 2-Apr approaches, the noise around the implementation of tariffs is only likely
to get louder. We estimate India would potentially lose ~USD6bn (0.16% GDP) in exports to the US (at 10% broad tariffs), with this rising to ~USD31bn at 25% tariffs. While the nature of reciprocal tariff implementation is unclear, we believe a broad country-level tariff by the US is the most likely scenario, given complications around sector/commodity-level tariffs."

Emkay's note said, "While India could be among the worst hit nations as per broad reciprocal differentials, we establish that the key susceptible sectors (Auto, Pharma, Electronics) are far better placed than feared, whereas Apparel and Gems/Jewellery are the most exposed. We also identify a few 'easy wins' to offer in exchange for tariff mitigation elsewhere (higher energy/defence imports, lower foreign EV tariffs etc)."

In the case of the auto sector, Emkay's note said, "Prima facie, the Indian auto sector would face some of the highest reciprocal tariffs if these are imposed at a sectoral level. However, digging deeper, we find that the Indian auto sector is relatively insulated from reciprocal tariffs due to the nature of trade between India and the US in this sector."

Data from Emkay showed that at the HS2 code level, India exported USD2.6bn worth of automobiles and auto components to the US in FY24, which was ~13% of India's total exports of ~USD20.9bn in this category. India's imports from the US were only ~USD0.6bn (~8% of total imports). However, cars and motorcycles are a very small part of India's auto trade with the US (FY24 exports of USD0.2bn, imports of USD0.06bn). The majority of India's exports to the US are of auto parts and accessories (FY24: USD2.1bn) with USD0.5bn of imports from the US of the same.

The White House on Wednesday announced a 25% tariff on imports of automobiles and certain automobile parts, addressing a critical threat to U.S. national security.

The move is to protect America's automobile industry, which is vital to national security and has been undermined by excessive imports threatening America's domestic industrial base and supply chains, the White House said.

A 25% tariff will be imposed on imported passenger vehicles (sedans, SUVs, crossovers, minivans, and cargo vans) and light trucks, as well as key automobile parts (engines, transmissions, powertrain parts, and electrical components), with processes to expand tariffs on additional parts if necessary.

FAQs:

Question : What is the new tariff announced by Donald Trump on automobiles?

Answer : The new tariff announced by Donald Trump on automobiles is a 25% tariff on imports of automobiles and certain automobile parts.,

Question : Exemptions from the 25% tariff on automobiles in any countries?

Answer : Importers of automobiles under the United States-Mexico-Canada Agreement will be allowed to certify their U.S. content and systems will be implemented such that the 25% tariff will only apply to the value of their non-U.S. content.

Question : What impact does the tariff have on American jobs in the automobile industry?

Answer : The tariff is expected to create more automobile jobs in America and potentially lead to higher wages.,

Question : Who are the winners and losers in the automobile market due to the 25% tariff?

Answer : The winners include Tesla, General Motors, Ford, and Stellantis, while the losers are likely to be luxury automakers like Mercedes, Volvo, and BMW, as well as importers like Toyota and Honda.,

Question : How much did the U.S. trade deficit in the automobile sector reach in 2024?

Answer : The U.S. trade deficit in the automobile sector reached $93.5 billion in 2024.