CLSA flags US tariff shock for Indian component makers, says JLR faces tough road ahead- Grow Mudra

CLSA flags US tariff shock for Indian component makers, says JLR faces tough road ahead

27 Mar , 2025 By : Debdeep Gupta

The US government’s 25 percent tariff on imported cars and key auto components, set to take effect on April 2, has put Indian auto ancillary companies with US exposure in the spotlight. Sona BLW, Bharat Forge, and Samvardhana Motherson (SAMIL) are among the most affected, with a significant chunk of their revenue tied to the US market.

Sona BLW and Bharat Forge are particularly vulnerable, deriving 43 percent and 38 percent of their revenues, respectively, from the US, with most of their products manufactured in India. This leaves them fully exposed to higher duties, potentially impacting margins and pricing strategies.

Among them, SAMIL appears better positioned to weather the storm, thanks to its manufacturing footprint in the US, including a large facility in Alabama that could help it sidestep the tariff impact by supplying domestic automakers.

Sona derives about 66 percent of its revenue from the U.S. and European markets. To mitigate risks, Sona BLW has been diversifying its export base by expanding into China, Japan, and South Korea, aiming for these Eastern markets to contribute over 50 percent of its revenue within five years.

Meanwhile, Tata Motors' Jaguar Land Rover (JLR) faces a direct hit, with 31 percent of its retail sales coming from the US. Since most JLR models are made in the UK, they will be fully exposed to the new tariffs. However, CLSA notes that the US has historically been a lower-margin market for JLR, which could soften the financial blow.

With collections starting April 3, all eyes are now on how these companies adapt—whether through price hikes, cost cuts, or strategic shifts in manufacturing.

At about 11 am, shares of Sona BLW Precision Forgings were trading 4 percent lower while Bharat Forge managed to recoup losses to trade marginally lower. On the other hand, Samvadharan Motherson shares were down 2 percent while Tata Motors nosedived 5 percent. Nifty Auto trimmed its losses, trading 0.8 percent lower after falling nearly 2 percent in the morning session.