Auto stocks drop up to 4% on US tariff hike, export concerns rise

Nifty Auto index stocks, including Balkrishna Industries, Bharat Forge, Bajaj Auto, Tata Motors, and Motherson, fell up to 4% in Thursday’s trade after the Trump administration imposed a 26% blanket tariff on Indian imports. Analysts view this as a major setback for India’s export-driven sectors, particularly automobiles.

The automobile sector, which contributes around 3% of India's total exports to the US, is expected to face pressure. "A 26% blanket tariff will likely impact demand and the competitiveness of Indian automobile exports in the American market. This could lead to increased production costs, potential layoffs, and supply chain disruptions," Macquarie noted.

The brokerage also warned that such steep tariffs across industries could impact India’s GDP by up to 50 basis points.


India’s auto component exports to the US account for one-third of the total industry exports of $21.2 billion. However, in the US import basket for auto components, India's share stands at just 2%, compared to Mexico’s 39%, Canada’s 13%, and China’s 12%.

The new tariff could impact companies like Sona BLW Precision Forgings, which derives 40% of its revenue from the US market, while Bharat Forge gets around 30% and Motherson Group around 18%.

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Reacting to the news, Indian markets saw a knee-jerk reaction at the opening bell. The BSE Sensex fell over 500 points, while the Nifty50 slipped below 23,200 within the first 15 minutes of trade.

The 26% levy on Indian imports is higher than the 20% imposed on the European Union, 24% on Japan, and 25% on South Korea.

While China faces the steepest tariff at 54%, India's sudden inclusion in the higher tariff bracket is seen as a significant setback for its trade relations with the US.

Meanwhile, New Delhi is currently in talks with Washington to negotiate a bilateral agreement to minimize the economic fallout and secure better trade terms for affected industries.

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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)