The Indian auto sector is in the spotlight as the tariff war becomes even more heated. US President Donald Trump has criticised India’s high import tariffs on cars, threatening to impose similar levies on Indian goods. The development is particularly relevant as Tesla’s India entry plans firm up.
So far, most analysts have played down concerns about either Tesla or tariff and the gains on the Nifty Auto Index seem to be confirming the market’s conviction as well. Several auto stocks are up smartly with component makers like Samvardhan Motherson up 3.60%, followed by Apollo Tyres, which was up 2.20%. Bharat Forge also clocked 2% gains. Leading automtove manufacturers like Mahindra & Mahindra (M&M) and Tata Motors are also trending higher.
Trump Versus India: The tariff tussle
US President Donald Trump has once again targeted India’s high import duties on cars, which can go up to 110%. In a recent speech to Congress, he announced that from April 2, the US will introduce reciprocal tariffs, meaning Indian exports to the US could face higher taxes in response. The US has been pressuring India to lower car import duties as part of a trade deal. However, as per the Reuters report, it suggests that while India is open to gradual reductions, an immediate cut is unlikely.
Elon Musk has long criticised India’s high import taxes, calling them among the highest in the world. These tariffs were a major reason why Tesla delayed its India launch despite the country being the third-largest car market globally.
UBS says Tesla’s India plans not a major threat
Tesla’s entry into India may not significantly impact the local EV market, as per a report by UBS. As per the brokerage report, the Model 3, Tesla’s best-selling car in the US, is unlikely to suit Indian roads due to its low ground clearance (138mm) and sedan design. Instead, the Model Y, a more relevant option for India, could come with a Rs 50-60 lakh price tag, including a 15% customs duty. This puts it in competition with high-end EVs like the Kia EV6, BYD Seal, and Hyundai Ioniq 5, which collectively sell fewer than 200 units per month.
How auto stock are reacting
Mahindra & Mahindra (M&M): The stock has seen a series of upgrades. Brokerage firm Jefferies has maintained a ‘Buy’ rating, with a target price of Rs 4,075, believing the impact of Tesla will be limited in the near term. While the stock is down 11% so far in 2025, it has delivered a 39% return over the past year.
UBS has also upgraded the stock to a Buy and see, “limited impact from Tesla’s potential entry into India as the Model 3 (highest selling model in the US), currently priced at $35,000 (Rs 3.1 million), is likely not well-suited to the Indian market due to its low ground clearance (138 mm) and sedan form factor. The Model Y, which is the relevant model for the Indian market, is expected to have a landing price of Rs 5-6 million with 15% customs duty vs. XEV 9e top-end variant’s landed price of Rs 3.3 million.”
“Tesla’s Model Y pricing pits it against EVs such as Kia EV6, BYD Seal and Hyundai Ioniq 5, which together clock volumes less than 200 units/month. Our Tesla analyst Joseph Spak believes Tesla’s India foray could be limited to imports in the near to medium term (see report for detailed call highlights),” added the brokerage.
Tata Motors: Tata Motors shares have touched a 52-week low recently. Analysts believe Tesla’s entry will increase EV adoption in India, which could benefit Tata Motors in the long run. The stock has fallen 37.75% over the past six months and 35.81% over the past year.
CLSA has upgraded Tata Motors to High Conviction Outperform from Outperform, setting a target price of Rs 930, indicating a potential upside of over 30%. The brokerage expects Jaguar Land Rover (JLR) to see 7% volume growth and an 8.8% EBIT margin for FY26-27, with an average capex of £4.4 billion. CLSA also projects JLR’s free cash flow to reach £1.7 billion in FY27, after staying below 1 billion pound for two years. At current valuations, the implied value of JLR stands at Rs 73,000 crore (Rs 200/share), making it an attractive investment with a 23% free cash flow yield.
Maruti Suzuki: The stock has seen a 4% decline in the past five days and 12% in the past month. However, it has gained 3% YTD. The market capitalisation of the company stands at Rs 3.64 lakh crore. The 52-week high is Rs 13,680 and low Rs 10,725.
