Nifty Auto rises 3.4% as Trump hints at tariff exemption for auto imports

After Trump announced sweeping tariffs on April 2, the Nifty Auto index had dropped over 10 per cent.

(This report has been updated)

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  The Nifty Auto index surged 3.4 per cent on Tuesday after U.S. President Donald Trump hinted at granting exemptions on auto-related import tariffs. All 15 components of the index ended with gains of between 2 per cent and 8 per cent.

 

Trump on Monday said he was considering a modification to the 25 per cent tariffs imposed on foreign auto and auto parts imports from Mexico, Canada and other places. Those tariffs could raise the costs of a car by thousands of dollars, and Trump said car companies "need a little bit of time because they're going to make 'em here."

 

 

Shares of Samvardhana Motherson International, the country’s largest auto component maker by market value, ended 8 per cent higher, Balkrishna Industries and Bharat Forge rose 7 per cent each, while Tata Motors gained 4.6 per cent. The Jaguar Land Rover (JLR) maker gets about a fourth of its sales from the US.

 

After Trump announced sweeping tariffs on April 2, the Nifty Auto index has dropped over 10 per cent. The index has recouped almost all the losses and is down less than a per cent from April 2 levels. Companies that rely heavily on the US markets had seen the maximum losses.

 

Trump's latest comments came days after he said he would pause "reciprocal" tariffs imposed on dozens of countries for 90 days.

 

In a note on Friday, Nomura said that Indian suppliers could benefit from the pause on tariffs, as U.S. automakers look to source parts outside of China amid tit-for-tat tariffs between Washington and Beijing.

 

While most Indian carmakers, except Tata Motors, have limited exports to the US, the scenario is starkly different for auto component manufacturers. For them, the US has been the number one export market for many years. 

 

According to the Automotive Component Manufacturers Association of India (ACMA), the industry exported auto components worth $11.1 billion globally in the first half of 2024-25. Of this, nearly 28 per cent—valued at $3.67 billion—was shipped to the US.

 

According to Crisil Ratings’ estimates from the last week of May, the US's decision to impose a 25 per cent tariff on components such as engines, transmissions, powertrain parts, and electrical parts could compress the operating margins of Indian component exporters by 125–150 basis points from the current 12–12.5 per cent range, assuming full absorption of the tariffs. 

 

Rajnikant Behera, Executive Director of auto parts maker RSB Global, told Business Standard on March 27 that while it was too early to accurately analyse the impending impact of the recent US tariffs, the company anticipated a temporary dip in vehicle demand in the US, making cost management more challenging for end customers. "This uncertainty could also prompt some companies to reconsider or delay their expansion plans in the US and Mexico region," he had said.