US tariffs, EV slowdown pose global hurdles for Indian auto

Tata Motors Ltd and Ashok Leyland Ltd, India's third-largest passenger and commercial vehicles respectively, are among companies rethinking global strategies, while component makers stare at uncertainty after the latest Trump tariffs.

While Ashok Leyland has decided to stop making electric buses and light commercial vehicles in the UK citing muted EV adoption, Tata Motors, which was earlier optimistic about EV exports, has decided to extend the life of Jaguar Land Rover's internal combustion engine platforms and even introduce more variants on them. The latest Trump tariffs have worsened the prospects for the industry, especially for component makers who draw a big chunk of sales from the US.

“The entire auto industry has to deal with global uncertainty for now. Especially for the auto component space, the US was one of the biggest markets, and the imposition of tariffs by the US could cause a slowdown within the next year," said Preetesh Singh, a specialist at Nomura Research Institute.

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On Wednesday, US president Donald Trump announced a 25% tariff on all cars and components fully made abroad. While India's car exports to US stood at just $8.9 million in FY24, it shipped nearly a third of its overall parts exports of $21 billion to the US, which now come under Trump's tariff hammer.

Noida-based Samvardhana Motherson International Ltd, India's most-valued component maker, clocked nearly a fifth of its revenue from the US in FY24, while Gurugram-based Sona BLW Precision Forgings Ltd recorded 40% of its sales from the US. Pune-based Bharat Forge Ltd received nearly a tenth of its total revenue from the US during the year.

Industry executives said that these companies can leverage their manufacturing plants in the US, and that Motherson already meets much of its demand from such units.

If parts makers pass on the tariff costs, it may make them uncompetitive in the US. However, it is not known whether they will do so. According to Nomura's Singh, most big firms will be able to sustain the tariff hit and the impact will be temporary.

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“Automakers are adjusting their focus to the domestic markets as global uncertainties, such as slowing EV adoption in Europe and US trade tariffs, impact their strategies. However, this doesn’t mean global ambitions will take a back seat. Instead, it's their chance to refine international strategies while fortifying the domestic foothold," said Saket Mehra, a partner at Grant Thornton Bharat.

While auto firms rethink global markets, they are already doubling down on the EV transition within the country, as adoption picks up pace. Ashok Leyland's FY24 annual report said it had around 900 electric buses on Indian roads. Its order book now stands at more than 1,800. Meanwhile, Tata Motors expects EVs to make up 30% of its local sales by 2030.

At an industry event in January, Tata Motors managing director Shailesh Chandra had said that differences in standards had held back exports of ICE vehicles, and the transition to EVs can open up new markets since the same technology is in use everywhere. Currently, for Indian automakers, exports make just a tenth of their domestic sales.

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Electric car sales in India grew 20% in 2024 to reach nearly 100,000 units, with Tata Motors leading with a 62% share. However, in December 2024, its share fell to 45% as rival JSW MG Motor India closed in. The new tariffs may pose challenges to Tata Motors, as around 60% of its revenue came from the international markets in 2024. It recorded ₹67,496 crore in revenue in North America, which made up 15% of its total revenue in FY24.

“[Imposition of tariffs] may prompt the company to redirect its focus toward markets with more stable trade policies, such as India, the Middle East, and Southeast Asia, to sustain long-term growth. The company may explore options to relocate production and reassess its pricing strategy in response to the evolving trade landscape," Shridhar Kallani, research analyst, auto, Axis Securities, said.

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