Key Points
Tata Motors stock drops 5.47% on US tariff fears
JLR derives 22% of sales from US market
Trump's 25% tariff impacts UK-made JLR vehicles
Analysts see risk-reward improving after steep correction
The stock declined 5.47 per cent or Rs 38.75 to close at Rs 669.5 on the National Stock Exchange (NSE).
Trump's announcement came as part of his plan to introduce reciprocal tariffs on various countries. The new car tariffs are set to take effect from April 2, which has raised concerns for automakers with significant US exposure.
The United States is a crucial market for JLR, accounting for nearly one-third of its total sales in 2024.
According to the company's annual report, 22 per cent of JLR's overall sales came from the US, making it a major revenue source for the brand.
JLR vehicles sold in the US are mainly produced in the UK and other international plants, all of which will now face a 25 per cent tariff.
The impact of these new tariffs on the company's financials remains uncertain, leading to volatility in Tata Motors' stock.
Despite the recent fall, the company's management has remained optimistic. Tata Motors had recently reiterated that JLR is on track to meet its fourth-quarter target of 10 per cent EBIT (earnings before interest and taxes) margins and aims to be net debt-free by the end of the financial year.
These comments had earlier helped the stock recover from its 52-week low of Rs 606. Even after its recent recovery, the stock remains down by 40 per cent from its all-time high.
Many analysts believe that the uncertainty surrounding tariffs is keeping investors cautious. However, some suggest that the steep correction in Tata Motors' stock from its July 2024 peak of Rs 1,179 has made the risk-reward ratio more attractive for investors.
"About a fifth of the revenue of India's auto component sector is derived from exports. Of this, 27 per cent is to the US market alone," said Anuj Sethi, Senior Director, Crisil Ratings.
He added that however, select automotive component players, with US-based manufacturing facilities may see some offsetting gains from better capacity utilisation.
