Tata Motors came under pressure after brokerage firm Kotak Institutional Equities downgraded the stock and sharply cut its price target, citing growing concerns over Jaguar Land Rover’s (JLR) exposure to new US tariffs. The stock has already been reeling from a sharp decline, and the latest move from Kotak adds to investor worries surrounding future profitability and volume growth.
Kotak Turns Cautious on Tata Motors
In a note released Monday, April 7, Kotak Institutional Equities downgraded Tata Motors to “reduce” from its earlier “add” recommendation and slashed the stock’s price target to ₹600 from ₹750—a 20 percent cut. The revised target is still above the current market price, though Monday’s dip has brought the stock well below even this updated level.
Kotak’s cautious stance stems from rising concerns around the impact of fresh tariffs imposed by former US President Donald Trump, which have already begun to take effect. The new 25 percent levy on auto and auto parts imports into the US could significantly hurt JLR, Tata Motors’ UK-based luxury car subsidiary, which derives between 28 percent and 40 percent of its total volumes from the US market.
US Market Headwinds for JLR
JLR’s flagship models—such as the Defender, Range Rover (RR), and Range Rover Sport—could lose competitiveness in the US due to their import-based supply chain, giving an edge to manufacturers with local production facilities, Kotak said.
The brokerage further noted that the broader US luxury vehicle segment may also face macroeconomic headwinds, potentially compounding challenges for JLR. The combination of higher tariffs and a softer demand environment could lead to an earnings downside of 15 percent to 37 percent, depending on how the tariffs are structured and how long they persist.
Highlighting the gravity of the situation, JLR last week announced a pause in shipments to the US for April to assess the full impact of the tariff regime. The automaker reaffirmed the importance of the US as a key market for its luxury vehicle line-up.
Financial Performance and Outlook
Despite the near-term turbulence, Tata Motors achieved a major financial milestone by meeting its FY25 guidance of becoming net debt-free. The company ended the year with a net cash position, suggesting operational discipline even amid mounting headwinds.
In the March quarter, JLR’s North America wholesale volumes grew 14.4 percent year-on-year, outpacing the overall wholesale growth of just 1.1 percent. However, the future trajectory remains uncertain given the evolving trade dynamics and geopolitical tensions.
Stock Performance: Deep in the Red
Tata Motors shares have tumbled more than 42 percent over the past year. The downward spiral has continued into April, with the stock shedding 12 percent already this month, despite a brief rebound of 8.6 percent in March. Prior to that, it had been in the red for seven consecutive months.
The Tata Group stock hit a 52-week low of ₹542.55 in the previous session. Although it rose 4.5 percent intraday on Monday to ₹606.40 on the back of broader market strength, it remains over 48 percent below its 52-week high of ₹1,179.05, touched in July 2024.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
