Jaguar Owner Posts $3.8 Billion Loss on Slump in China 

(Bloomberg) -- Tata Motors Ltd. reported a third straight quarterly loss as luxury unit Jaguar Land Rover Automotive Plc took an impairment of 278.4 billion rupees ($3.9 billion), mainly on account of challenges in the China market.

• Net loss was 270 billion rupees in the three months through December, the company said in a statement on Thursday, as it battled waning demand for diesel cars and risks from a potentially disorderly Brexit. Analysts predicted profit of 7.73 billion rupees on average.

Key Insights

• Diesel vehicles account for just under 90 percent of Jaguar’s sales in Europe at a time when consumers are increasingly choosing more environmentally-friendly options. By 2040, more than half of all new car sales and a third of the planet’s automobile fleet -- equal to 559 million vehicles -- will be electric, according to Bloomberg NEF.
• Tata Sons Chairman N Chandrasekaran said market conditions continue to be challenging, particularly in China. The company was taking “decisive steps” to increase its competitiveness, reduce costs and improve cash flows, he said in a statement Thursday.
• Tata Motors risks sinking deeper into junk as its earnings wane. Fitch placed the company on negative credit watch, citing Brexit risks.

Market Reaction

• Shares of Tata Motors closed 2.8 percent higher on Thursday before the earnings were announced. They are down 52 percent in the past year on concerns about Jaguar Land Rover’s waning sales, profitability and high capital-expenditure requirements.
• Credit-default swaps protecting Jaguar’s debt against non-payment using five-year contracts surged to record high 813 basis points on Wednesday. The cost to buy protection on Jaguar bonds was as low as 113 basis points in August 2017.

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• Net revenue came in at 770 billion rupees missing the 787.5 billion rupees analysts had predicted on average.
• Tata Motors expects costs from Jaguar’s voluntary redundancy program to be recognized in the March quarter.
• Read full statement here

To contact the reporters on this story: Rahul Satija in Mumbai at rsatija1@bloomberg.net;P R Sanjai in Mumbai at psanjai@bloomberg.net

To contact the editors responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net, Ville Heiskanen, Bhuma Shrivastava

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