Tata Motors Q1 consolidated net profit falls 49% as JLR China demand wanes

Mumbai: Tata Motors Ltd, India’s largest automobile maker by revenue, on Friday reported a 49% drop in first-quarter net profit as sales at its UK luxury car unit Jaguar Land Rover (JLR) Automotive Plc declined as demand weakened in China, its largest market.

Net profit fell to Rs.2,769 crore in the three months to June from Rs.5,398 crore in the year-ago quarter. Net sales declined 6.2% to Rs.61,020 crore from Rs.64,683 crore in the same quarter last year.

The company’s profit and revenue fell short of expectations. The company had been expected to post a profit of Rs.3,238 crore on sales of Rs.64,359.5 crore, based on the findings of Bloomberg analyst surveys.

The JLR unit’s revenue for the quarter fell 6.6% at £5 billion from £5.35 billion in the year-ago last year because of lower sales in China, where demand for luxury cars has dropped as economic growth slows. JLR’s net profit fell 29% to £492 million from £693 million in the same period.

Meanwhile, the company’s Indian operations showed signs of recovery in terms of sales. Net sales jumped 20% to Rs.9,197.62 crore in the three months to June. Net profit, however, declined to Rs.257.57 crore from Rs.393.65 in the same quarter last year.

The company’s commercial vehicles sales were boosted by heavy duty truck sales, while new model launches in the passenger vehicle segment, such as the Zest, Bolt and Nano GenX, pushed up passenger vehicle sales.

Tata Motors stock has dropped 30% since its March 2015 peak, a reversal marked by fears around China, wrote analysts Chirag Shah and Siddharth Bera of Edelweiss Securities India Ltd in a 3 August report.

“We believe that Street is already factoring in a worst case scenario for JLR. While we agree that there is a likelihood of downgrade in profits from China, we do not expect it to be more than 50% (for operating profit), in a worst case scenario,” they wrote.

On Friday, Tata Motors shares closed at Rs.392.55 per share, up 2.5%. The benchmark BSE Sensex closed at 28,236, down 0.22%.

The earnings were released after markets hours on Friday.

Tata Motors