Jaguar owner posts RM16b quarterly loss as China demand weakens

Jaguar owner posts RM16b quarterly loss as China demand weakens

The headline that Jaguar Land Rover has posted a loss for the last quarter of 2018 of £3.4bn is a startling fact - a sum nearly twice what Tata paid for JLR a decade ago - but it is caused by write-downs rather than operational losses, although the actual losses for the last quarter of 2018 are still a sobering £273m. Its sales in China - the world's biggest auto market - fell 40% in January compared to the same period previous year. China JV revenues stood at GBP 348 million, less than half of GBP 768 million, it had reported in the year ago quarter.

Jaguar Land Rover, which Tata Motors bought in 2008, contributes over 70 per cent to Tata Motors' total revenue and has been a major cash generator over the years. "Despite the muted growth, Tata Motors has delivered strong results, registered an impressive profitable growth this year on the back of exciting products, renewed brand positioning and aggressive cost reduction", Guenter Butschek, CEO and MD, Tata Motors, said in the statement.

In a filing with the BSE, the automaker said its performance was impacted by challenging market conditions particularly in China and inventory corrections.

The company is pinning its hopes of a short-term turnaround on returning to sales growth in China, alongside its cost-cutting programme.

Plummeting sales in China are compounding Jaguar Land Rover's challenges that include the industry's shift away from vehicles powered by petrol and diesel - a stronghold for the company.

On Friday, Tata Motors and Tata Motors DVR tanked over 20 per cent each and hit a low of Rs 129 levels and Rs 71, respectively on the National Stock Exchange (NSE).

"We see a gradual improvement in China ahead, and expect our numbers stabilize and now we have to work on profitability for our dealers", Balaji said.

Tata Motors took a non-cash charge of 278.38 billion rupees for an impairment at JLR in the quarter.

Excluding the one-off accounting charge, JLR lost £273m before tax during the last quarter. Hence, we downgrade our rating to Neutral with a target price of Rs 166 (Mar'21E SOTP).

Jaguar Land Rover said that drop in profit was down to a slump in sales in the struggling Chinese market, which offset a slight rise in sales in Europe and the US.

"The group has a significant trade imbalance and production bias to the United Kingdom and could be significantly affected by trade barriers and various logistic issues", the credit rating agency said. On NSE, the shares settled at Rs 150.15, down 17.88 percent.