Tata Motors, M&M to Maruti Suzuki: 14 Nifty Auto stocks crack up to 50% from peak. What’s behind the slide?

Stock market today: Indian automobile stocks have emerged as some of the biggest casualties in the recent market meltdown, weighed down by a series of negative developments that have dampened investor sentiment. Once high-flying, these stocks are now trading at levels not seen in several months.

The Nifty Auto index, which tracks the performance of 15 leading auto stocks, has tumbled nearly 4% in the last trading session to hit a new 52-week low of 19,316. However, the index in today's session, April 08, took a little breather as it is up by nearly 1% at the day's high but still remains 28% below its September peak of 27,696 points.

Fourteen out of the 15 constituents in the index are now trading at significant discounts from their recent peaks, with Tata Motors emerging as the biggest laggard—down 50% from its 1-year high of ₹1,179, currently trading at ₹587. Its listed peers, Mahindra & Mahindra and Maruti Suzuki India, are also trading 23% and 20% below their respective recent highs.

Auto ancillary stocks such as Samvardhana Motherson International are down 48%. In addition, 10 of the index constituents are down more than 20% from their 1-year highs, leading to a substantial erosion of investor wealth.

Domestic challenges

The performance of auto stocks has come under pressure, largely due to sluggish domestic demand—particularly in the passenger vehicle segment. Urban consumers, facing rising food inflation and declining wages, have deferred their vehicle purchases, leading to tighter household budgets and weakened sentiment among the middle class.

This trend has been especially evident in the small car segment, where sales have remained subdued. Experts attribute this to a combination of affordability constraints, fading pent-up demand post-COVID, and the high base effect from previous years, all of which have weighed on overall growth.

Reflecting these headwinds, multiple reports now indicate that auto sales in FY25 are expected to register single-digit growth for the second year in a row. Supporting this cautious outlook, Original Equipment Manufacturers (OEMs) are projecting muted domestic volume growth of just 1–4% year-on-year in FY2025–26, suggesting that the slowdown in consumer demand may persist into the current financial year.

In FY24, India’s passenger vehicle industry crossed a major milestone by surpassing 4 million in annual sales for the first time, reaching a record 4.2 million vehicles—an 8.6% increase over FY23—though still trailing pre-COVID levels.

While overall 2W sales appear healthy, it's largely due to robust exports, as domestic demand remains subdued.

Competition concerns rise

Adding to domestic woes, the Indian car market is expected to face heightened competition as both the United States and the European Union are reportedly pressuring India to lower its steep import tariffs on automobiles as part of ongoing trade negotiations.

The EU is specifically pushing for the complete elimination of car import duties, which currently exceed 100%.

India is reportedly open to a phased reduction in tariffs—from over 100% to around 10%—according to two industry sources and a government official cited by Reuters. Such a move would benefit European carmakers like Volkswagen, Mercedes-Benz, and BMW by expanding their access to the Indian market, the report added.

Similarly, the U.S. is urging India to lower tariffs on electric vehicles (EVs) to help facilitate a trade agreement—supporting companies such as Tesla in their efforts to enter India.

India's car market—estimated at 40 lakh units a year—is among the most protected globally. Domestic manufacturers argue that drastic tariff cuts could threaten local production by making imports significantly cheaper.

Indian automakers, including Tata Motors and Mahindra & Mahindra, have voiced concerns that reducing import duties could undermine investments in local manufacturing, especially in the EV sector.

Tariff worries

U.S. President Donald Trump’s imposition of a 25% tariff on all automobile imports last month may not directly impact India’s automobile exports due to their relatively low exposure to the U.S. market. However, the domestic auto ancillary industry, which has significant revenue dependence on global markets, could face margin pressure, according to analysts.

Domestic brokerage Kotak Institutional Equities noted that the 25% tariff on auto parts, along with a potential 26% reciprocal tariff, will weigh on global auto ancillary suppliers. First, the tariff will increase landed costs, forcing suppliers to absorb some of the cost hike, thereby squeezing margins.

Second, competition could intensify as global peers with manufacturing bases in the U.S. gain cost and logistical advantages, raising the risk of market share loss.

Lastly, higher tariffs are likely to push up vehicle prices, potentially dampening U.S. auto demand and creating a ripple effect across global supply chains.

4QFY25 preview: Demand continues to be weak across segments

Motilal Oswal expects its auto OEM coverage universe to report just 2% year-on-year (YoY) earnings growth in Q4FY25, reflecting continued weakness in demand across segments. The brokerage expects TVS Motor, Mahindra & Mahindra, Eicher Motors, and Ashok Leyland to outperform their peers.

In contrast, Hyundai is projected to record the steepest earnings decline of 21% YoY, primarily due to margin contraction. Motilal Oswal also maintains a subdued outlook for Maruti Suzuki, estimating a 10% YoY drop in earnings for the quarter, mainly due to higher depreciation expenses.

"Within our ancillary coverage universe, it is important to highlight that only 5 out of 16 companies are likely to post earnings growth, with no company expected to post double-digit earnings growth. Among the laggards are Apollo (41% earnings decline), Craftsman, MRF, CEAT , Motherson Sumi Wiring India, and CIE Automotive," said the brokerage.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.