Auto index up 3%; Samvardhana Motherson, TaMo rally up to 10%; here's why

Media report suggests President Donald Trump is considering possible exemptions to his tariffs on imported vehicles and parts to give auto companies more time to set up US manufacturing.

Automobiles and its related shares have rallied by up to 8 per cent on the National Stock Exchange (NSE) in Tuesday’s intra-day trade as media reports suggest, President Donald Trump is considering possible exemptions to his tariffs on imported vehicles and parts to give auto companies more time to set up US manufacturing facilities.

 

At 09:20 AM; the Nifty Auto index surged 3 per cent, the top gainer among sectoral indices, as compared to the 2 per cent rise in Nifty 50.

 

Samvardhana Motherson International, Bharat Forge and Tata Motors have rallied between 5 per cent and 10 per cent. Mahindra & Mahindra (M&M), Balkrishna Industries, Tube Investment of India, Bosch, Maruti Suzuki India, TVS Motor Company, Hero MotoCorp and Eicher Motors were up in the range of 2 per cent to 4 per cent.

 

 

However, despite today’s upmove, in the past six months, the auto index has underperformed the market by falling 20 per cent, as against the 7 per cent decline in the Nifty 50.

 

President Donald Trump said he is exploring possible exemptions to his tariffs on imported vehicles and parts to give auto companies more time to set up US manufacturing, Bloomberg reported. The president’s comments could potentially bring relief to automakers reeling from his duties on car and light truck imports, but they also inject further uncertainty into his tariff plans, the report noted.  ALSO READ | Sensex zooms 1500 points on Tuesday; Is the worst over for the markets?

 

This development is regarding the blanket 25 per cent import tariff levied on automobiles (passenger vehicle and LCV) and auto components which may change. Therefore, the benefits will flow towards the domestic automotive space, more so on the component side (forging and transmission players), given that vehicle exports are minimal from India, ICICI Securities said in a note.

 

This is positive for all forging players such as Bharat Forge, Ramakrishna Forgings, Sansera Engineering and transmission players such as Sona BLW. This is also a positive development for Tata Motors whose overseas luxury PV arm, i.e. Jaguar Land Rover (JLR), realises substantial volumes from the North American market (~33 per cent), the brokerage firm said.

 

"The USA is an important market for JLR's luxury brands. As we work to address the new trading terms with our business partners, we are enacting our planned short-term actions including a shipment pause in April, as we develop our mid- to longer-term plans,” Tata Motors said on April 8. The Tata Group had made a clarification on the news report, which suggested that JLR will pause exports to the US in April due to Trump's auto tariffs.

 

There is no decision or plan of action. This is just emphasising that JLR is evaluating various options to suitably address the impact of the increased tariff in the US market and the aforesaid news article refers to its immediate response, Tata Motors said.

 

Additionally, the share price movement due to the announcement of US tariffs is happening across the world and so the movement of Tata Motors share price is due to what is happening in the external world and not due to this article, the company said.

 

Share price of Tata Motors had hit a 52-week low of ₹542.55 on April 7. In eight trading days, between March 23 and April 7, the stock had plunged 25 per cent.