US Tariff Trouble: Rocky Road Ahead For Tata Motors, Bharat Forge As Demand May Be Hit

The 25% tariff announced by the US on imported cars and parts could increase car prices by approximately $3,700, as per Nomura's US auto analysts.

US President Donald Trump has announced a 25% tariff on imported cars and parts effective from April 3, 2025.

If these increased costs are partially passed on to consumers through a 4% price increase, it could reduce demand by about 8%, which adds up to approximately 1 million vehicles, according to the brokerage.

The imposition of these tariffs aligns with the US' objectives to decrease reliance on China and support the growth of US manufacturing.

In the fiscal year 2024, Tata Motors' Jaguar Land Rover reported that approximately 23% of its revenue and about 26% of its total wholesale volume came from the US market. More recently, JLR's volume exposure to the US has increased to 33% in the first nine months of the financial year 2025.

JLR manufactures its cars in the UK, except for the Defender, which is manufactured in the European Union and accounted for 25.9% of JLR's US volumes.

Among auto component suppliers, Bharat Forge, Sona Comstar, and Motherson have significant exposure to the US market.

In the previous year, Bharat Forge's consolidated revenue from the US was approximately 25%, and its standalone revenue was 35%.

Sona Comstar's revenue from the US was approximately 40% and Motherson's revenue from the US was approximately 18%.

Motherson has manufacturing facilities in the US, situated in Alabama, Michigan, and Houston. This could help increase production to reduce tariff exposure. Nomura expects that suppliers will pass on these tariffs to original equipment manufacturers.

The immediate impact of tariffs could lead original equipment manufacturers to significantly raise prices, as they need time to find alternative solutions. This essentially may reduce demand for vehicles, said Nomura.

Relocating manufacturing bases to the US will be difficult for companies. The average hourly wage in India is $1.5, compared to approximately $2.5 in Mexico and $15 in the US. If all OEMs and suppliers try to move production to the US simultaneously, a labor shortage could occur, further increasing wages, according to the brokerage.

Higher tariffs on other consumer products could increase inflation, raise interest rates, and negatively affect US consumer sentiment, which has already declined significantly, the brokerage noted.