Global automobile stocks have fallen 10-20% over the past three months amid rising concerns about stagnation in the US car market. This may also have some effect on the US-focused Indian auto and component companies such as Tata MotorsBSE 1.53 %, Bharat Forge and Motherson Sumi.
The US is the second-largest car market in the world after China, and together both constitute nearly half of the total global car sales volume. The fast pace of 5-12% growth over the past six years in the US market is expected to slow down rapidly as analysts expect a drop of as much as 4% in sales in the next two years. Credit Suisse said in a report that the US passenger vehicles (PVs) growth has peaked and has deteriorated in the last couple of months, which may affect pricing too.
This means that Indian companies, where projected earnings growth for the next two fiscals hinges on the US market, may be affected. Tata Motors’ subsidiary JLR derives nearly 19% of total sales volume from the US. In addition, for JLR, the US market grew at a brisk pace of 26% in the eleven months of the current fiscal compared with its total volume growth of 10.5% globally.