Shares of Tata Motors Limited, the parent company of Jaguar Land Rover (JLR), took a significant hit on Thursday, declining 5.47% (Rs 38.75) to close at Rs 669.5 on the National Stock Exchange (NSE). The sharp drop followed an announcement by US President Donald Trump, who unveiled a 25% tariff on imported cars as part of his broader push for reciprocal trade measures.
The new import tariffs, set to take effect from April 2, have raised concerns among global automakers, especially those with substantial exposure to the US market. The United States plays a vital role in JLR’s sales, accounting for nearly one-third of its total revenue in 2024. According to Tata Motors’ latest annual report, 22% of JLR’s global sales came from the US, making it a crucial revenue stream.
JLR primarily manufactures its luxury vehicles in the UK and other international plants, which means that under the new trade policy, these models will now be subject to the 25% tariff when sold in the US. This move has created uncertainty about how the company will navigate the increased costs and potential impact on demand in one of its largest markets.
Despite this setback, Tata Motors’ management remains optimistic. The company has reiterated that JLR is on track to achieve its fourth-quarter target of 10% EBIT (earnings before interest and taxes) margins and is committed to being net debt-free by the end of the financial year. These assurances had previously helped the stock rebound from its 52-week low of Rs 606. However, even after some recovery, Tata Motors’ stock remains down by 40% from its all-time high recorded in July 2024 at Rs 1,179.
Market analysts are divided on the impact of these tariffs. Some believe that uncertainty around the new policy is leading to investor caution, while others argue that the stock’s steep correction presents a better risk-reward opportunity for long-term investors.
Anuj Sethi, Senior Director at Crisil Ratings, pointed out that India’s auto component sector derives nearly 20% of its revenue from exports, with 27% of these exports heading to the US market. While the tariff poses a challenge for the industry, select automotive component manufacturers with US-based production facilities may benefit from improved capacity utilization.
As the April 2 deadline for the new tariffs approaches, investors will closely monitor Tata Motors’ strategies to mitigate the impact of rising trade barriers and maintain JLR’s stronghold in the US market.
