Morgan Stanley has reiterated its ‘Equal-weight’ rating on Tata Motors with a target price of ₹853, warning that the recently imposed 25% U.S. auto import tariffs could severely dent Jaguar Land Rover’s (JLR) free cash flow and overall valuation.
In a fresh note, the brokerage cautioned that if the tariffs remain in place, JLR may turn free cash flow negative in FY26. Assuming no change in capex plans and that JLR absorbs the full impact of the higher duties, Morgan Stanley estimates FY26 FCF could decline to negative GBP 500 million. The note comes just days after JLR paused its U.S. vehicle shipments for a month to evaluate the tariff impact.
While Morgan Stanley expects Tata Motors to post strong Q4FY25 numbers, especially led by JLR’s robust performance, the market’s attention, it says, is likely to shift toward broader macro risks, including the UK/EU and USA trade talks.
The brokerage added that a slowdown in India’s auto cycle and a weaker free cash flow profile of JLR amid the tariff overhang could drag Tata Motors’ valuation closer to its bear case of ₹416 per share. In that scenario, JLR would contribute only ₹90 to the overall valuation, with the remainder attributed to the company’s India passenger and commercial vehicle businesses.
