Auto Stocks Slide On FTA Worries, Mahindra & Mahindra Falls 5% As NIFTY AUTO Stays Under Pressure

Mumbai: Shares of auto companies came under pressure in early trade on Tuesday, January 27, dragging the NIFTY AUTO index lower by about 1.6 percent. Among all auto stocks, Mahindra & Mahindra (M&M) saw the sharpest fall.

M&M shares dropped nearly 5 percent to hit an intraday low of Rs 3,363.70 on the NSE. Overall, 12 out of 15 stocks in the NIFTY AUTO index were trading in the red, reflecting broad weakness in the sector.

Why Mahindra & Mahindra stock fell?

The fall in M&M shares was mainly linked to concerns over the proposed India–European Union Free Trade Agreement (FTA). Investors fear that the deal could increase competition in India’s auto market, especially in the premium and luxury segments.

Reports suggest that India may lower import duties on European cars, which currently range between 66 percent and 110 percent. If duties are reduced, global luxury brands such as Audi, BMW, and Mercedes-Benz could become more affordable in India.

Expected import duty cuts

According to a CNBC-TV18 report, import duties on cars from the EU may be cut to around 30 percent–35 percent, with in-quota duties gradually falling to 10 percent over five years.

Lower duties could make imported European vehicles cheaper, increasing competition for Indian carmakers operating in the premium SUV and executive car segments.

Impact on auto companies

For Mahindra & Mahindra, analysts believe the risk is higher as the company has strong exposure to the premium SUV segment through popular models like the XUV700 and Scorpio.

A note by Goldman Sachs estimates a 1.9 percent impact on M&M’s profitability due to rising competition in the Rs 23 lakh-plus price segment.

On the other hand, Tata Motors’ Jaguar Land Rover (JLR) could benefit, as lower duties may help its luxury models become more competitive in India. However, cheaper European electric vehicles could challenge Tata Motors’ domestic EV leadership.

What the India–EU FTA includes?

The India–EU FTA, expected to be announced on January 27, is likely to cover duty cuts on cars, wines, textiles, footwear, and other labour-intensive sectors. India has pushed for zero-duty access for exports like textiles, leather, and gems, while the EU has sought tariff cuts on automobiles and alcoholic beverages.

Disclaimer: This news is for information only and does not constitute investment advice. Stock prices may change due to market risks and policy developments. Investors should consult financial advisers before making investment decisions.