Tata Motors Share Price Cracks 5% – What’s Behind the Fall? Explained

Tata Motors

On June 16, 2025, shares of Tata Motors, one of India’s largest and most trusted automobile companies, witnessed a significant drop of over 5% during early trade. The stock touched an intraday low of ₹672.75 on the BSE, raising concern among investors and market watchers.

This sharp decline came after Tata Motors released a cautious outlook for its premium British subsidiary Jaguar Land Rover (JLR) for the upcoming financial year (FY26). Here’s a complete breakdown of the reasons behind this fall, its implications, and what investors should know.

What Triggered the Fall in Tata Motors Share Price?

The fall in Tata Motors’ share price is primarily attributed to revised earnings guidance and rising macroeconomic headwinds, especially those related to international trade dynamics. The company announced that JLR’s EBIT (Earnings Before Interest and Taxes) margin for FY26 is expected to be in the range of 5%–7%, a steep drop from its earlier guidance of 10%.

The downgrade in margin guidance is a result of growing concerns over U.S.-imposed tariffs on imported vehicles, which are expected to significantly impact JLR’s business in one of its key markets — the United States.

The U.S. Tariff Impact on JLR

The 25% import tariff imposed by the United States on foreign-manufactured vehicles has emerged as a major headwind for Jaguar Land Rover. The U.S. government’s policy shift — reminiscent of previous trade wars — is aimed at reducing the influx of foreign cars, with a particular focus on electric vehicles and high-end luxury vehicles.

Being a foreign luxury car brand, JLR is directly in the line of fire. In response to the tariffs, JLR has reportedly paused vehicle shipments to the U.S., at least temporarily. This move is expected to impact short-term sales and profits, and it has clearly spooked investors.

Free Cash Flow Forecast Decline

Adding to investor concerns, Tata Motors also revealed that JLR’s free cash flow, which was a healthy £1.5 billion in FY25, is likely to fall to near-zero levels in FY26. This projection indicates not only a profit squeeze but also potential constraints on investment, expansion, and debt reduction capabilities.

While the company remains optimistic about a gradual recovery starting FY27 and FY28, the near-term financial strain has added a layer of uncertainty.

JLR’s Importance to Tata Motors

Understanding the impact of JLR’s financial performance is crucial, as it is not just another subsidiary—JLR accounts for a significant share of Tata Motors’ overall business:

  • Contributed 71% to total consolidated revenue in FY25

  • Delivered 80% of Tata Motors’ overall profitability during the same period

This level of dependence on JLR means that any headwinds affecting JLR directly affect Tata Motors’ valuation, and that’s exactly what is playing out in the markets now.

Tata Motors Share Performance – Recent Trends

As of June 16, 2025, Tata Motors’ stock has shown clear signs of weakness. Let’s take a look at how the share has performed:

  • ✅ Intraday Low: ₹672.75

  • ✅ Current Trading Price (10:27 AM): ₹681.90

  • ❌ Down 5.5% intraday

  • ❌ Down 43% from 52-week high of ₹1,179.05

  • ❌ Down 31.4% over the past year (YoY)

  • ❌ Year-to-date (YTD) decline of around 9%

This sustained weakness reflects broader concerns, including the global EV transition, regulatory changes, and export market volatility.

What Analysts Are Saying

Market analysts suggest that the downgrade in EBIT margins, combined with geopolitical risks like tariffs, has heightened near-term pressure on Tata Motors’ stock. However, many maintain a long-term positive outlook on the stock, citing Tata Motors’ strength in the domestic EV space and its continued investments in innovation and platform upgrades.

Some brokerages have even suggested that the current dip could present a buying opportunity for long-term investors, provided JLR successfully navigates the tariff and margin pressures in the next 1–2 years.

What Lies Ahead for Tata Motors?

Tata Motors management remains cautiously optimistic about a recovery. They have highlighted that FY27 and FY28 should see improvements in both margin and cash flow as the company adapts its supply chain, reconfigures pricing strategies, and introduces next-generation EV and hybrid vehicles under the JLR brand.

Moreover, Tata Motors is also focusing on cost-cutting, operational efficiency, and product innovation, both in its domestic business and through its international arms.

Takeaways for Investors

  • Tata Motors’ 5%+ stock drop is driven by lowered EBIT guidance and US tariff risks impacting JLR.

  • Free cash flow concerns and halted U.S. shipments have raised short-term red flags.

  • Despite near-term turbulence, the company projects recovery from FY27 onward.

  • Investors are advised to monitor U.S. policy developments, JLR’s response strategies, and Tata Motors’ execution on EV plans.

 

Final Thoughts

While the fall in Tata Motors’ share price is significant, it’s important to note that the core business fundamentals remain strong. The impact of U.S. tariffs and short-term financial headwinds are real, but they may present a temporary setback rather than a long-term trend.

For investors with a long-term investment horizon, this correction could offer an opportunity to accumulate shares at a lower valuation. However, caution is advised until more clarity emerges on how JLR navigates the shifting global landscape.