What happened
Shares of Indian automaker Tata Motors (TTM) were trading sharply lower in the U.S. on Monday morning. Tata, which is also traded on India's National Stock Exchange (NSE) in Mumbai, was caught in a broad NSE sell-off on Monday on concerns about a new wave of COVID-19 infections in India.
As of 11:15 a.m. EDT, Tata's U.S.-traded shares were down about 11.8% from Friday's closing price.
So what
Tata and other Indian auto companies including Mahindra & Mahindra and Ashok Leyland closed sharply lower in trading in Mumbai on Monday, after India's second-most populous state, Maharashtra, reported its biggest one-day spike in coronavirus cases since the beginning of the pandemic.
Maharashtra, in southeast India, is home to much of the country's industry including Tata Motors. After the state reported more than 63,000 new COVID-19 cases on Sunday, investor worries about a potential lockdown drove a broad sell-off of shares of industrial companies located in the region.
As of late Monday afternoon in Mumbai, officials in Maharashtra had not yet decided whether to impose a full lockdown across the state.
A factory owned by Tata subsidiary Jaguar Land Rover could be idled if authorities impose a new lockdown amid rising COVID-19 cases. Image source: Jaguar Land Rover.
Now what
Auto investors should keep in mind that much of Tata's profit is generated by its British subsidiary, Jaguar Land Rover (JLR). While JLR does have a manufacturing facility in the city of Pune in Maharashtra, the company builds the vast majority of its vehicles in the U.K., Slovakia, and China.
Put simply, a lockdown in Maharashtra is likely to be a short-term headache for Tata, not a long-term problem.
