Tata Motors Looks For Partners To Turn Around Jaguar Land Rover

Tata Motors Ltd. is looking for partnerships for its British arm Jaguar Land Rover to lessen the financial burden as it has been hit hard by continued sales slowdown and mounting losses, Chairman N Chandrasekaran said.

Addressing shareholders at an annual general meeting in Mumbai, Chandrasekaran pointed out that the automobile sector is such that a firm cannot shut the cash tap as this business demands continuous investment in product and technology.

“The only way to handle the ongoing crisis and the continuing need for large capex is additional investment through partnerships, because we want to spread the investment, which cannot be shut either,” Chandrasekaran said. “There are many discussions from tactical to strategic for such partnerships. Opportunities are coming and we keep evaluating them. We’ll forge such partnerships so that we are able to address the capex issue.”

On the Brexit, Chandra said, more than the final outcome, it’s the uncertainty that is hurting JLR in its home market and continental Europe—the largest source market for the millions of components that the carmaker procures annually.

It can be noted that the woes at JLR, which used to be Tata Motors’ cash cow for years, has led to its bottomline sinking for the past three successive quarters.

Tata Motors booked the largest ever loss in India in the Dec. 2018 quarter worth Rs 26,961 crore due to an impairment charges on JLR. Last week, it reported a net loss of Rs 3,679 crore for the June quarter as against Rs 1,862 crore loss in March 2019.

On the troubles that JLR has been facing in China, Chandra said there are two types of revenue from the largest auto market, one through Chery-JLR joint venture under which some models are produced locally and other through selling imported units. “Both these revenue streams are affected now,” he admitted and said the company on average has been seeing 40-50 percent dip in volumes in China.

“Our focus should be to continuous press operational efficiency, forge partnerships so that the capex can be optimised in any form of the partnership that makes sense and that get the volume pick up,” he said.

“Honestly speaking, the issue is in terms of sales. We need to pick up sales. But otherwise if you take the debt, the domestic business has got Rs 15,000-16,000 crore, roughly 2.5 times the Ebitda, but the JLR debt apart from working capital is completely sustainable,” Chandra said.

Stressing on the need to remain continuously invested, he said, like any other auto company, JLR also has to invest in future technologies of hybrid and electric. We also have to invest in the future models and also in areas like shared mobility. That's very important to stay alive in this ecosystem. All this means there is a need for capex if you want to be future ready, he said.

But there is a silver lining in China as “for the first time in 12 months, we are seeing a positive volume growth in China in July after a recovery in June. But we need to wait for a couple of more months to see whether there’s a trend”. He said during the past 12-18 months, JLR has cut down capex from around 4.5 billion pounds to 3.9 billion pounds.

“And we are working towards cutting down further, but we can't take a very drastic cut.”

Chandra said Tata Motors has made big investments in electric vehicle business and it plans to have EVs of the four existing models, of which the hatchback Tigor is already commercially available.

The next EV model will be Nexon, which is expected to be launched around January, he said adding then Altroz and followed by one more.

“There are four models that we plan as of now. We not only have to create the models, but we have to create EV infrastructure as well for which Tata Motors and Tata Power are working closely. We plan to put EV infrastructure in at least 25 cities. We need to create this demand as well.”