Risks emerging from the US have left automotive investors worried. US President Donald Trump has announced 25 per cent tariffs on automotive imports, while global electric carmaker Tesla has taken its first steps towards entering India.
While these developments are sentimentally negative for related stocks, it may be too early to conclude the eventual impact, analysts said.
They suggest investors buy automotive stocks on dips for long-term gains.
“Tesla entering the Indian automotive market will have a sentimental effect on listed electric vehicle (EV) players.
"Meanwhile, tariffs on automotive imports into the US would also affect Indian carmakers to a certain extent, but we need to see how sustainable these tariffs are,” said independent market analyst Ambareesh Baliga.
On Wednesday, Trump said he would levy around 25 per cent import tariffs on automobiles starting April 2, 2025.
However, he did not clarify whether the import tariffs would apply to all countries or specific ones.
Separately, Elon Musk’s global EV giant Tesla is reportedly looking for a land parcel to establish an EV manufacturing facility in India.
On the bourses, the Nifty Auto and Nifty 50 indices have remained muted over the past four trading sessions.
Among individual stocks, Mahindra & Mahindra (M&M) shares have declined 3.7 per cent during this period, while Maruti Suzuki India (MSIL) shares are down 2 per cent. However, Tata Motors shares have risen 1.1 per cent.
Shaken & stirred
According to analysts, Trump’s tariff announcement has sent ‘shockwaves’ through the automotive industry; however, implementation might be difficult as it could be inflationary for US consumers.
They see tariffs as Trump’s negotiation tool rather than a lasting proposition.
They, therefore, advise investors to wait for further clarity before ‘panic selling’ automotive stocks.
On the other hand, Tesla’s entry into the Indian automotive market, analysts said, may intensify competition but is unlikely to eat into incumbents’ market share, as much will depend on the company’s pricing.
“Tesla’s entry into India will not bring any structural shift in the (automotive) industry landscape. While some buyers may show interest in high-end Tesla cars, it is unlikely to affect Indian companies.
"Tesla’s entry into India has been discussed for years and is largely factored into stock prices,” said Sanjeev Hota, head of research at Mirae Asset Sharekhan.
Baliga concurred, saying he does not expect a major shift in customer loyalty.
“Tesla’s price range will be higher than that of the target customers of Tata Motors India EV, MSIL, and M&M, and hence, I don’t see any shift here.
"M&M may see a first-mover advantage in the mid-segment EVs, with the BE 6e and XEV 9e (priced between Rs 20 lakh and Rs 35 lakh) seeing record bookings.
"Overall, I see Tesla’s entry expanding the EV market in India, but it may not eat into the market segment of existing listed EV players,” he said.
According to a report by Nomura, passenger EVs as a percentage of total passenger vehicle (PV) sales are expected to rise to 9.3 per cent by 2029-30, compared to 2.3 per cent at the end of 2023-24.
That said, the near-term outlook for the automotive industry remains bleak, with most PV companies projecting 1-1.5 per cent year-on-year industry growth in 2025-26 (FY26).
“PV affordability has remained constrained, benefits from income-tax cuts are likely to be limited for the bottom-of-the-pyramid segment, and currency depreciation may raise costs.
"Hence, key industry players believe the premium/sport utility vehicle segment will continue to do well, while the mass segment may remain subdued in FY26,” Nomura observed.
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