Tata Motors falls 5% on weak JLR sales in October

Shares of Tata Motors were down 5% at Rs 185 on the BSE after the company’s British arm Jaguar Land Rover (JLR) total retail sales fell 4.6% year-on-year (Y-o-Y) at 44,282 vehicles in October.

JLR’s sales in China decreased by 49% Y-o-Y as market conditions remain challenging amid tariff changes and continued trade tensions with the US, which are impacting consumer confidence and automotive purchases. Sales also declined in Europe (13.5%) due to ongoing diesel uncertainty and sales were 4% lower year on year in overseas markets, the company said in a statement.

Retail sales rose significantly in the UK (46.9%) and North America (24.1%) on the back of strong sales of newer models, namely the Jaguar I-PACE and E-PACE and the refreshed Range Rover and Range Rover Sport, it added.

JLR total retail sales for 2018 calendar year to date were 492,388, down 4% compared to the same period last year.

JLR is a luxury car manufacturer selling its premium range of products worldwide with major markets being US, China & Europe. The demand sentiment in these global markets is cautious amidst the headwinds of Brexit, Tariff barriers between key global economies as well as stringent emission control norms worldwide.

“The company is implementing a turnaround plan and taking all the necessary steps to rejuvenate our business, especially, in China. This involves working closely with sales network and balancing production with demand in the present market conditions to achieve healthy development for the company’s future that is not unduly dependent on incentives,” said Felix Brautigam, Jaguar Land Rover Chief Commercial Officer.

“At the JLR front, the company has initiated cost & cash control measures i.e. “Project Charge” with cash savings of 2.5 billion pounds ($3.2 billion) over FY19-20E. The management reaction is prudent amidst challenging business environment; we, however, are unenthused given persisting macro-economic headwinds,” analysts at ICICI Securities said in result update.

On the consolidated level, free cash flow (FCF) pressure to persist at Tata Motors going forward. The company has lost market share in China amidst the tariff barriers, the brokerage firm said with ‘hold’ rating on the stock and target price of Rs 200.

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