Nifty Auto index slips 2%; M&M, Hyundai Motor skid up to 5%; here's why

Auto stocks in focus: ICICI Securities see limited impact of likely lower EU import tariffs on Indian Auto OEM space which is steadily progressing to clock ~45 lakh units' sales volume in FY26E.

Nifty Auto index movement today

 

Shares of automobiles were under pressure with the Auto index falling by 2 per cent on the bourses in Tuesday’s intra-day deals after the Prime Minister Narendra Modi announced the signing of a free trade agreement (FTA) between India and the European Union. CLICK HERE FOR FULL REPORT  

Nifty Auto and BSE Auto index were down 2 per cent on the bourses in intra-day deals and underperformed the market. At 01:02 PM; Nifty Auto and BSE Auto index were down 1.52 per cent each, as compared to 0.12 per cent rise in the Nifty 50 and a marginal 0.01 per cent decline in the BSE Sensex.

 

Among individual stocks, Mahindra & Mahindra (M&M) skid 5 per cent to ₹3,363.70 on the NSE in intra-day trade. Hyundai Motor India was down 4.5 per cent at ₹2,162.05, while Maruti Suzuki India (₹15,013) and Ashok Leyland (₹188) were down 3 per cent each in intra-day trade.  READ STOCK MARKET UPDATES TODAY LIVE

Why are automobile stocks under pressure on Tuesday?

 

According to media reports, as per the India-EU FTA signed, India will cut import duties on a limited number of European cars to about 40 per cent; down from current levels i.e. 70–110 per cent. 

 

The tariff concession is restricted to internal combustion engine (ICE) vehicles only, priced above €15,000, and will apply under a quota system, meaning only a fixed number of cars will qualify (2 lakh cars per annum). Electric vehicles (EV) are excluded from these concessions for now, reflecting India’s intent to protect its domestic EV industry. Over a longer transition period, duties on eligible cars could be reduced further, potentially to around 10 per cent, subject to agreed timelines and safeguards.

 

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ICICI Securities, PL Capital view on Indian auto industry

 

According to ICICI Securities, by limiting tariff cuts to ICE cars above €15,000 (landed incl. duty costs in India at >₹ 22 lakh) and capping volumes through quotas, India has signalled a cautious opening rather than a full-scale liberalisation of its auto market. The structure of the deal clearly favours premium and luxury European brands (can potentially expand the luxury car segment in India which is pegged at ~52,000 units p.a.), while shielding mass market segments and the strategic EV ecosystem at home for players like M&M, Maruti & Tata Motors. 

 

The benefits to be accrued to the Indian auto industry for exports to EU could not be ascertained at this point in time and shall await further details in this matter, the brokerage firm said in a note. However, ICICI Securities see limited impact of this lower import tariffs on Indian Auto OEM space which is steadily progressing to clock ~45 lakh units’ sales volume in FY26E.  According to analysts at PL Capital, tariff cut will provide EU carmakers greater access to Indian PV market (3rd largest globally by volume, just behind the US & China). Luxury vehicles form around 1 per cent of Indian market. Therefore, the tariff reduction should not impact the mass market players like Maruti Suzuki and entry/mid-level vehicles from Tata Motors Passenger Vehicles (TMPV) and M&M, but it will impact to a small extent premium plus cars from these players.  Tariff reduction on battery electric vehicles (BEVs) is expected to be applicable after 5 years in a phased manner, giving the likes of TMPV and M&M some relief, analysts said.    ALSO READ | Axis Bank up 4% on Q3 show; analysts bullish on asset quality, loan growth

Auto sector Q3 results preview

 

Analysts at BNP Paribas India expect the October to December 2025 quarter (Q3FY26) revenue expansion to be mainly driven by strong volume growth with Maruti Suzuki India, M&M and TVS Motor being the leaders followed by Eicher Motors, Hero MotoCorp, Ashok Leyland and Bajaj Auto. 

 

While the brokerage firm expects revenue expansion to be strong, operating margin could be impacted as proprietary commodity index has increased for PVs and 2Ws due to a rise in base metal prices. Hence, analysts expect modest margin expansion as the tailwind from better utilisation should be partly offset by c40-50bp hit from higher commodity prices, some impact from INR depreciation and continued high discounts in PVs.  ==========================  Disclaimer: View and outlook shared on the stock belong to the respective brokerages and are not endorsed by Business Standard. Readers discretion is advised.