Tata Motors share price drops 6% after Trump announces new tariffs
Tata Motors share price falls as Trump unveils 25% tariffs on foreign cars
Shares of Tata Motors Ltd. dropped as much as 6% on Thursday, March 27, after U.S. President Donald Trump announced a 25% tariff on cars not manufactured in the U.S.
Key Takeaways
- Jaguar Land Rover (JLR), which generates nearly a third of its sales in North America, particularly the U.S., faces a significant risk.
- Despite the tariff concerns, Tata Motors management has maintained confidence that JLR will meet its fourth-quarter guidance of 10% EBIT margins and will become net debt-free by the end of the current financial year.
- Analysts remain cautious and are waiting for more clarity on the tariff situation. Some analysts believe that the stock may present a favorable risk-reward ratio given its sharp decline from the July 2024 peak.
Impact on Jaguar Land Rover (JLR)
The U.S. market is incredibly important for Jaguar Land Rover, representing a significant portion of its global sales. In 2024, nearly a third of JLR’s sales were derived from North America, with the U.S. being the largest contributor, reports CNBC TV-18.
This market has long been a key pillar of the company’s revenue. The newly announced 25% tariff on cars not manufactured in the U.S. threatens this vital income stream. Given that many of JLR's vehicles are produced in the UK and other non-U.S. locations, the tariffs could make their cars significantly more expensive in the U.S. market.
Tata Motors Ltd (TAMO) share price dynamics (Dec 2024 - Mar 2025) Source: TradingView
This, in turn, could hurt demand, especially for luxury vehicles like those in the JLR lineup, which rely on price competitiveness in a price-sensitive market. In addition to affecting sales, the tariffs could lead to higher operational costs for JLR, which may further squeeze profitability and slow recovery in the U.S. market, where competition is fierce from both domestic and international manufacturers.
Tata Motors’ Financial Outlook
Tata Motors has responded to concerns about the potential negative impact of the tariffs by reassuring investors about the company’s long-term financial goals. Despite the headwinds, the management is confident that JLR will continue to meet its financial targets, including achieving a 10% EBIT margin in the fourth quarter of the current financial year.
The company also intends to become net debt-free by the end of this fiscal year, a goal it believes will help strengthen its balance sheet and mitigate some of the financial strain caused by tariffs and market volatility. Management’s optimism has provided a degree of reassurance to the market, helping the stock recover from its recent 52-week low of ₹606.
However, the overall sentiment remains cautious, as the uncertainty surrounding the tariffs could impact not only the near-term performance but also future growth prospects, particularly if the tariff situation intensifies or if additional trade restrictions are imposed.
Brokerage Opinions on Tata Motors’ Stock
Several leading brokerages, including CLSA and Nuvama, have provided their perspectives on Tata Motors following the tariff announcement. CLSA has maintained an “outperform” rating on the stock, suggesting that despite the challenges posed by the tariffs, the company remains fundamentally strong.
CLSA points out that the stock is currently trading at a historically low multiple, making it an attractive entry point for long-term investors. Nuvama, on the other hand, acknowledges the risks posed by the tariffs but believes that JLR has the capacity to offset the impact through strategic price hikes and cost-cutting initiatives.
Analysts predict that JLR may pass on the increased costs from tariffs to customers, particularly for its higher-end vehicles, which could help protect its margins. However, many analysts are urging caution and recommending that investors wait for more clarity on the tariff’s full impact before making further decisions.
Tata Motors faces a challenging period ahead with the potential for tariffs to impact Jaguar Land Rover’s U.S. sales. While the stock has seen some recovery, the ongoing uncertainty regarding U.S. trade policies and tariffs remains a critical factor that could influence the company’s performance in the short term.
Additionally, Tata Motors' stock gained 4% on March 12 after the company’s CFO provided optimistic guidance on Jaguar Land Rover (JLR) and domestic operations.
