Shares of Indian automotive companies such as Tata Motors, Samvardhana Motherson, and Ashok Leyland rose up to 2 per cent on July 28, buoyed by the trade agreement signed overnight between the United States (US) and the European Union (EU). Lower tariffs and smoother trade flows in the automobile sector between two of the world’s biggest economic bloc’s will likely increase export volumes and cut costs for Indian firms with global operations.
Tata Motors shares surged 1.95 per cent to hit the day’s high at Rs 700.50 apiece on the National Stock Exchange (NSE), before closing at Rs 682.90, down 0.65 per cent against previous close.
Samvardhana Motherson shares gained up to 1.97 per cent to hit an intraday high of Rs 102.32 apiece, before closing at Rs 101.88 apiece, with gains of 1.53 per cent. Similarly, Ashok Leyland surged up to 2.5 per cent before closing with a gain of 0.66 per cent at Rs 122.75 apiece.
Tata Motors Could Benefit from JLR’s EU Plant
One of the companies likely to benefit the most is Tata Motors, which owns Jaguar Land Rover (JLR). JLR runs a major manufacturing facility in Slovakia, part of the EU, and exports a large share of its vehicles to the US.
With the new trade deal potentially easing tariffs between the EU and US, JLR could see improved margins on its exports, something investors seem to be factoring in.
EU-US Trade Relations
In 2024, as per US Department of Commerce, EU’s exported 7,85,000 passenger vehicles and light trucks to the US worth $44 billion. EU alone accounts for 18 per cent of passenger vehicles and light trucks US imports.
On the other hand, US exported over 2,17,000 vehicles to the EU, worth $10.5 billion. Of this, Germany alone accounted for more than 1,44,000 units.
Further, the US buys over 11 per cent of all auto ancillary products it imports.
Auto Stocks Outlook
Mishra of Religare Broking cautioned that this rally is likely to be a short-term reaction driven by optimism and relief over reduced trade friction and might not be a sustainable one.
“The current momentum appears to be a short-term reaction to reduced trade uncertainty and tariff relief. Sustained gains will depend on the finalisation of long-term trade agreements, India's export competitiveness, and global demand trends. Without structural tailwinds, the rally may lose steam,” he said.
