Tata Motors shares remained under scrutiny following a downgrade by Kotak Institutional Equities, which expressed concern over the potential impact of fresh US tariffs on Jaguar Land Rover (JLR), the company’s UK-based luxury vehicle arm.
In a report released on April 7, Kotak revised its rating on Tata Motors to “reduce” from “add” and slashed the stock’s price target to ₹600 from ₹750—a sharp 20% cut. The revised target suggests only a modest 3% upside from Monday’s closing price.
The downgrade comes in light of new 25% tariffs imposed by former US President Donald Trump on imported automobiles and auto components. These duties could significantly disrupt JLR’s operations, considering the US accounts for roughly 28% to 40% of its total sales volume.
Tariff Troubles for JLR
Kotak highlighted that JLR’s key models—including the Defender, Range Rover, and Range Rover Sport—could become less competitive in the US due to their reliance on imports. Rival luxury automakers with domestic production capabilities could benefit from the new tariff regime, leaving JLR at a disadvantage.
In addition to higher costs, JLR may also face challenges from a potential slowdown in the US luxury car market, further compounding the risk to earnings. Kotak projected that these factors could reduce JLR’s earnings by 15% to 37%, depending on the duration and scope of the tariffs.
In response to the uncertainty, JLR has temporarily halted shipments to the US for April as it assesses the full implications of the new trade policy. The company reiterated the strategic importance of the US market for its premium vehicle portfolio.
Financial Health and Resilience
Despite the macroeconomic headwinds, Tata Motors achieved a significant financial milestone by becoming net debt-free in FY25, ending the year with a net cash position. This marks a notable achievement in financial discipline amid a challenging operating environment.
For the March quarter, JLR’s North America wholesale volumes posted a strong 14.4% year-on-year increase, outperforming the company’s overall wholesale growth of 1.1%. However, analysts caution that this momentum may not be sustainable under the new tariff landscape.
Stock Performance: A Downward Slide
Tata Motors’ stock has seen a significant decline, losing over 42% of its value over the past year. April has continued the bearish trend, with the stock falling an additional 12% so far this month. While it briefly rebounded by 8.6% in March, it had already logged seven straight months of losses prior to that.
The company’s shares hit a 52-week low of ₹542.55 in the previous session before climbing 4.5% on Monday to ₹606.40 amid a broader market rally. Nonetheless, the stock remains 48% below its 52-week high of ₹1,179.05, reached in July 2024.
As investors weigh the long-term outlook, all eyes remain on how Tata Motors and JLR will navigate the shifting global trade environment and maintain profitability amid growing external pressures.
