Auto stocks such as , (M&M), and fell up to 5% in Tuesday’s session amid fears of increased competition following the India-EU FTA.
Mahindra & Mahindra shares emerged as the top loser as they declined 5% to ₹3366.50 on the BSE today. Maruti Suzuki stock was lower by almost 3%, and Tata Motors’ share price shed 2%.
Why are auto stocks falling?
According to reports, the European Union is expected to make progress in areas such as automotive and technology products as part of the India-European Union Free Trade Agreement, while Electric Vehicles, Internal Combustion Engines (ICE), and Heavy Commercial Vehicles are likely to have distinct quotas.
The import duty on cars from the European Union is expected to decrease to between 30% and 35%, down from the current rates of 66% to 110%. Additionally, India will gradually reduce the in-quota duty over five years, eventually reaching a rate of 10%.
Seema Srivastava, a Senior Research Analyst at SMC Global Securities, stated that India’s move to reduce import tariffs on cars from the EU is expected to shake the auto sector. European luxury car manufacturers such as Volkswagen, Mercedes-Benz, and BMW are anticipated to gain advantages by offering vehicles at more competitive prices, said the expert.
“Local dealerships and service providers will also see a boost. However, domestic players like Tata Motors and Mahindra & Mahindra may face increased competition in the luxury segment,” said Srivastava, explaining the decline in shares of Indian OEMs today.
Bhavik Joshi, the Business Head at INVasset PMS, pointed out that currently, India has high import duties on completely assembled passenger cars, which can frequently exceed 60–100% based on the engine size and vehicle valuation.
Joshi indicated that the proposed framework between India and the EU does not plan for an immediate removal of these barriers. Rather, it is anticipated that tariff adjustments will occur gradually, likely varying by vehicle valuation categories, engine specifications, and possibly limited by annual quotas.
He believes that luxury and high-end vehicles are expected to receive relief earlier, while vehicles in the mass-market segment might remain protected for a longer period.
“The current churn in auto stocks, therefore, should be seen as part of a policy-driven re-rating conversation rather than a response to an impending volume shock. Investors are adjusting to the idea that India’s auto sector is gradually being woven into a broader global trade framework. The real effects will play out over years, but in the markets, the debate—and the volatility—begins immediately,” explained Joshi.
Auto stocks outlook: Technical view
According to Anshul Jain, Head of Research at Lakshmishree, auto majors Mahindra & Mahindra, Maruti Suzuki India, and Tata Motors have all broken below their respective weekly swing lows, signalling a clear deterioration in price structure.
“This weakness is unfolding alongside the auto index failing to sustain its breakout above the previous all-time high, confirming a sector-wide loss of momentum rather than stock-specific noise,” added Jain.
Tata Motors looks particularly vulnerable, with trend alignment turning decisively bearish across timeframes, according to Jain. Given the structural damage, a minimum downside of 5% from current levels appears highly likely across auto counters, he said.
“Until the index reclaims lost ground with volume support, rallies in auto stocks should be treated as sell-on-rise opportunities rather than reversal setups,” added the expert.
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.