Export-oriented auto ancillary stocks such as Samvardhana Motherson, Bharat Forge, and Sona BLW have underperformed this year, dragged down by trade tensions and the impact of double tariffs. While the government’s latest GST rationalisation offers some relief as domestic demand is expected to pick up, analysts believe sentiment is likely to remain choppy in the medium-term.
So far this year, shares of Samvardhana Motherson, Bharat Forge, and Sona BLW have fallen by as much as 30 percent, sharply underperforming the benchmark Nifty 50 index, which has gained 5 percent. However, brokerage data suggests sentiment has improved after the GST move, with analysts turning more bullish on these counters.
According to Bloomberg, Samvardhana Motherson currently enjoys 22 “buy” ratings, up from 21 at the end of the June quarter, alongside 1 hold and 3 sell calls. For Sona BLW, brokerages have issued 13 buy recommendations, compared to 12 earlier, while holds dropped to 3 from 4 and sells remained unchanged at 3. Meanwhile, Bharat Forge drew 9 buy, 8 hold, and 1 sell ratings, versus 13 buy, 7 hold, and 8 sell at the end of the June quarter.
GST cuts offer domestic tailwind
Analysts at Choice Institutional Equities note that the revised GST structure presents a significant opportunity for the auto sector as demand volumes are set to accelerate. With small cars, two-wheelers, and three-wheelers moving to the lower 18 percent slab, affordability improves, potentially boosting demand that had earlier been constrained by high vehicle prices. This uptick in demand should lift auto part sales and benefit ancillary companies.
However, while GST-led gains may provide a tailwind for domestic demand and margins, experts caution that they are unlikely to fully offset the impact of higher duties of 25–50 percent on certain categories in export markets.
India’s auto component exports were worth $23 billion in FY23, with North America (32 percent) and Europe (29.5 percent) together making up over 60 percent of shipments—leaving the sector heavily exposed to tariff actions.
Tariff risks keep exporters on the edge
Market expert Ajay Bagga said that while domestic consumption-driven plays remain safer, auto companies with significant US exposure will need time to navigate these challenges.
“With Trump’s protectionism coming in, no free pass is likely for auto components. Over time, companies may even need to set up factories within the US,” he said. At the same time, he pointed to new opportunities in Africa and Latin America, with Ethiopia emerging as an attractive hub due to its favourable tax regime and location, and countries such as Kenya, South Africa, and Nigeria also drawing attention.
Adding to this, trade negotiations could provide some cushion. Talks for an India-EU free trade agreement are progressing, with officials aiming to seal a deal by December. The India-UK FTA also represents a strategic opening for greater market access, while India’s ties with China have shown incremental improvement since border disengagement efforts began in late 2024.
On the company front, an auto analyst who wished not to be named said that Samvardhana Motherson appears relatively better positioned. At its latest investor meet, the company reiterated its strategy to cap dependence on any single geography at below 10 percent. Already, over 80 percent of its revenues come from overseas, with significant localisation in Europe, North America, and Asia, giving it a structurally stronger footing compared to peers.
Bharat Forge, however, remains more exposed to US and EU risks, with 35–40 percent of exports tied to these markets. Its core products: precision metal components and forgings are highly tariff-sensitive. While overseas subsidiaries provide some hedge, its higher concentration in tariff-exposed categories makes it vulnerable, prompting analysts to advise caution until more clarity emerges on duty pass-through and localisation.
Sona BLW (Sona Comstar) faces the steepest tariff risk among Indian auto component makers, with around 43 percent of its revenues coming from the US. Management estimated a potential 6 percent revenue impact under current proposals. While the company is diversifying by investing in rare earth magnets manufacturing in India and expanding its EV portfolio, these efforts will take time to materially rebalance its exposure, leaving it more structurally at risk than peers.
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