The planned imposition of the claimed reciprocal tariffs on imports by the Donald Trump administration will impact Tata Motors and Samvardhana Motherson International (SAMIL), research and rating agency Moody’s said on Monday.
Vehicle exports to the US are limited at around 3% of total exports for India. However, auto parts suppliers and luxury carmakers selling directly to the US or indirectly through their operations in Canada and Mexico would face tariffs.
“The impact of higher tariffs on the profitability of carmakers and auto part suppliers will depend on how much of the tariffs they pass on to customers,” Moody’s noted in its report.
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Auto parts supplier SAMIL generates around 20% of its revenue from the US, which includes revenue from job work locations like Mexico. It has around 20 plants in the US serving the local original equipment manufacturers.
SAMIL will likely seek to pass on tariff-induced cost increases to its customers. It is also pursuing a diversification strategy to ensure no single component, customer or country accounts for more than 10% of its revenue.
Tata Motors’ subsidiary, Jaguar Land Rover Automotive, is exposed to potentially higher US tariffs on the EU- or UK-produced goods, with all its cars sold in the US produced in these two regions.
“Customers of JLR tend to be less price-sensitive compared to buyers of mass-market cars. But passing on the entire tariff increase may be difficult. A decline in demand from the US, which accounts for nearly a third of JLR’s sales, would be credit negative,” Moody’s added.
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The two British auto luxury brands generate a third of its worldwide wholesale volumes from North America, mostly in the US.
Though JLR posted a growth of 4% year on year (y-o-y) to nearly 400,000 units for the calendar year ended December 31, the North American market grew by 32% y-o-y to 124,600 units.
Popular nameplates, including Range Rover, Range Rover Sport, Land Rover Defender and Land Rover Discovery, are built in Slovakia.
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