US Tariff Imposition: Impact on Indian Auto Stocks

Shares of leading Indian auto component manufacturers, including Sona BLW Ltd. and Samvardhana Motherson Ltd., fell sharply on Monday, with declines of up to 8%. The downturn follows US President Donald Trump’s announcement of a 25% tariff on imports from Canada and Mexico, effective Tuesday, February 4, 2025. Additionally, a 10% tariff has been imposed on imports from China.

Auto Component Exports to Mexico: A Small but Significant Share

India exports auto components worth $21.2 billion globally, of which exports to Mexico contribute approximately 3%, amounting to $656 million. Industry experts indicate that the primary components exported to Mexico are metallurgical products such as forgings and casting materials.

With a significant portion of automobiles sold in the US being manufactured in Mexico and Canada, the tariff hike is expected to disrupt global supply chains and raise vehicle production costs. Automakers such as General Motors, Toyota, and Volkswagen could see major impacts, as 30-40% of GM and Toyota’s US sales, and nearly 60% of Volkswagen’s, come from Mexico-produced vehicles.

Impact on Samvardhana Motherson

For Samvardhana Motherson, Mexico accounts for approximately 4% of its total revenue as per news report. While the direct impact remains uncertain, it is expected to increase volatility as automakers reassess their supply chains. A key concern is whether OEMs (original equipment manufacturers) shift production to avoid the tariff-driven cost surge, which could impact Motherson’s operations in Mexico.

Impact on Sona BLW

Mexico contributes about 2% to Sona BLW’s total revenue. Although a major portion of value addition happens in India, Mexico serves primarily as an assembly hub. If OEMs decide to relocate production to the US, Sona BLW could restructure its supply chain to directly serve US-based manufacturing facilities.

China Tariffs and India’s Potential Opportunity

The US’s 10% tariff on China could further increase component costs for American automakers. This could push US companies to seek alternative suppliers, potentially benefiting India’s auto ancillary industry in the long run as per news report. However, the modalities of these tariffs and their impact on global trade remain subject to further evaluation.

Share Price Reaction

As of 11:32 AM on February 3, 2025, shares of Samvardhana Motherson were down by 8%. 

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