Only 3 Nifty Auto stocks zoom this year. Will Tesla’s India entry keep Motown in red?

Indian auto stocks have been under pressure, with the Nifty Auto index losing 7 per cent in February so far and showing a similar decline in 2025 YTD. While the Nifty Auto sector remained flat in January, it has been in a corrective phase since October 2024, shedding 21 per cent of its value. The downturn has been fueled by weak sales, slowing urban consumer demand, and contracting margins.

Adding to concerns, automakers expect a moderate performance in the financial year 2025-26, mirroring the current fiscal year’s trend. Weakness in small car sales—driven by affordability challenges, easing pent-up demand, and a high base effect—has significantly impacted the sector’s growth trajectory.

Additionally, external factors such as the Donald Trump administration’s proposed 25 per cent tariff on automobile imports to the U.S. and reports of Tesla’s potential entry into India have further weighed on sentiment. Tesla’s arrival could intensify competition in the electric vehicle (EV) market, disrupting local carmakers’ expansion plans.

Despite these headwinds, the Nifty Auto index remains up over 4 per cent in the past year, outperforming the benchmark Nifty, which has gained just 1.5 per cent in the same period.

Nifty Auto Constituents: Winners and losers

So far in 2025, only three of the 15 Nifty Auto index constituents have managed to stay in positive territory.

Maruti Suzuki is the top gainer, up almost 14 per cent in 2025 year-to-date (YTD) while Ashok Leyland and Eicher Motors have added over 1.5 per cent each.

Meanwhile, Apollo Tyres has emerged as the biggest laggard in the sector in this period, down over 26 per cent followed by Bosch, Samvardhana Motherson, and Bharat Forge, which have shed over 20 per cent each in 2025 YTD.

MRF has lost 19 per cent whereas Tata Motors, Exide and Hero Moto have lost over 10 per cent each.

Expert Take: Should you invest in auto space?

As India’s auto sector navigates a challenging phase marked by slowing sales and margin pressures, analysts are closely watching the evolving regulatory landscape and the potential impact of Tesla’s entry into the market. 

Proposed EV policies may hurt investment in domestic ICE segment

HSBC has raised concerns over India’s proposed EV policy changes, which could potentially favour imported EVs over locally manufactured internal combustion engine (ICE) vehicles. Reports suggest that the government is considering lowering import duties on EVs—an initiative believed to be aimed at attracting Tesla following Prime Minister Narendra Modi’s discussions with Elon Musk in the U.S.

HSBC noted that the proposed 15 per cent import duty on EVs is significantly lower than the 43-50 per cent GST imposed on locally produced ICE passenger vehicles, which also incur an additional 13 per cent road tax. While India currently imports only about 8,000 EVs annually, the brokerage warned that such a policy shift could deter long-term investment in the domestic ICE segment, potentially impacting the broader auto industry.

Tesla unlikely to disrupt domestic leaders

According to brokerages CLSA and Nomura Tesla’s entry into India is unlikely to significantly impact local leaders like Maruti Suzuki or Tata Motors but could benefit key suppliers such as Sona Comstar, Sansera Engineering, and Motherson Sumi.

CLSA said market excitement surrounding Tesla’s entry into India might be overstated. While a sub- ₹25 lakh Tesla model could gain market share, the brokerage does not foresee the U.S. giant significantly disrupting domestic leaders like Maruti Suzuki, Hyundai, or Tata Motors. Instead, it expects Tesla’s presence to accelerate premiumization in India’s auto market. 

CLSA also emphasized that Tesla would require local manufacturing to scale effectively. Even with import duties lowered to below 20 per cent, pricing its models under ₹35-40 lakh would be difficult without a domestic production base.

Echoing similar views, Nomura said that while Tesla’s entry could reshape the EV segment, established players will continue to dominate, especially in the mid-market and budget segments.

It believes that India’s evolving EV policies will speed up electric vehicle adoption, making it easier for global players like Tesla to invest in the country. The policy changes are also expected to boost India’s EV infrastructure, benefiting key suppliers such as Sona Comstar, Sansera Engineering, and Motherson Sumi, Nomura added.

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 taking any investment decisions.