Morgan Stanley warns of JLR hit as US tariffs loom over Tata Motors; stock down 7%

Tata Motor's stock price has crashed 10 percent since the start of the year.

Tata Motors could be staring down a major setback as US President Donald Trump’s 25 percent tariff on imported cars threatens to shake up Jaguar Land Rover’s (JLR) fortunes. With the US making up a significant chunk of JLR’s sales, the automaker may find itself on the losing end of this sweeping trade move.

Morgan Stanley has raised the alarm, warning of a potential earnings hit for JLR as the tariffs, set to take effect on April 2, cast uncertainty over the global auto landscape. While details remain murky on whether the duties will target specific countries or all non-US carmakers, one thing is clear—Tata Motors investors are bracing for impact.

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The US accounted for about 23 percent of JLR’s sales in FY24—around 15 percent of Tata Motors’ consolidated revenue—and its importance is rising, with the region contributing over 30 percent of JLR’s Q3 FY25 sales.

Share of the company plunged as much as 7 percent to Rs 661 in today's session. The stock pared some of its losses by day's end to close 5.5% lower at Rs 669.5. Tata Motor's stock price has crashed 10 percent since the start of the year.

According to Morgan Stanley, JLR has three medium-term options: passing costs to customers, cutting expenses, or absorbing the hit. If the company bears part of the tariff burden, operating margins could take a 200-bps hit, posing a downside risk to the firm’s 8.3 percent FY26 EBIT estimate. Free cash flow (FCF) could also be impacted, potentially forcing JLR to consider setting up a US manufacturing facility to navigate the levy.

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JLR vehicles sold in the U.S. are primarily manufactured in the UK and other international facilities—all of which will now attract a 25 percent tariff.

In Q3, the automaker’s performance was weighed down by weaker margins and subdued Jaguar Land Rover (JLR) volumes, despite a sequential improvement. Its EBITDA margin contracted 200 basis points to 14.2 percent. JLR’s profit before tax (before exceptional items) stood at GBP 523 million, lower than the GBP 627 million recorded a year ago.

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