Jaguar Owner’s Losses Mount on Weak Markets, Brexit Battle
JLR - the once-stellar British luxury brand - remains mired in slowing markets and threatened by brexit.
(Bloomberg) -- Jaguar Land Rover owner Tata Motors Ltd.’s losses keep on mounting as its once-stellar British luxury brands remain mired in slowing markets and threatened by the country’s looming exit from the European Union.
Sales at the Jaguar and Land Rover brands slumped during the second quarter, contributing to a doubling of Indian company’s net loss to a wider-than-expected 37 billion rupees ($535 million). The group has accumulated losses of about $1.8 billion over the past five quarters.
“It’s been a challenging quarter,” P.B. Balaji, chief financial officer of part of salt-to-software conglomerate Tata Group of India, said in a conference call with reporters. “As far as JLR is concerned, we are seeing China stabilizing, and we expect to see growth from here on as far as Chinese business is concerned.”
The persistent losses underscore an intensifying struggle by the iconic British automaker to deal with slumping demand in China and an industrywide shift toward cleaner fuels, which is hitting Jaguar Land Rover particularly hard. Adding to the challenges is renewed uncertainty in the U.K., where new Prime Minister Boris Johnson has vowed to deliver Brexit in less than 100 days, even if that means exiting the European Union without a divorce deal.
A hard Brexit could cost U.K.’s auto industry $63,750 every minute, as friction at the border will leave plants starved of parts. Meanwhile, the owner of the Jaguar sports cars and Land Rover sport-utility brands has been one of the biggest victims of a slowing Chinese car market, with its deliveries to dealerships plunging for 12 consecutive months.
“Should there be an event of a no deal, then that’s something we should be ready for,” said Balaji. “We already had it all ready for March 31, and therefore we will re activate those plans.”
Shares Decline
The U.S.-listed shares of Tata Motors were down 3.7% in pre-market trading. They closed 4.6% down to 144.30 rupees on Thursday in Mumbai before the results were announced.
JLR is also particularly vulnerable to the shift away from combustion engines across the world, and its woes have forced Tata Motors to explore strategic options for the luxury brand, including a potential stake sale, people familiar with the matter have said. Every JLR model will have an electric version by 2020, Balaji said.
JLR had a pretax loss of 383 million pounds ($479 million) before exceptional items during the quarter, compared with a 264-million pound loss in the year earlier period, Tata Motors said in a statement.
Here are some of the highlights from the numbers and the conference call:
- Significant improvement in cash delivery in China seen
- Expects to see growth in China for JLR from now
- Confident of delivering EBIT margin of 3-4% for JLR in FY20-21
- Sees JLR EBIT margin at 4-6% in FY22-23 and 7-9% beyond that
- Tata Motors to focus on retail growth in India
To contact the reporter on this story: Anurag Kotoky in New Delhi at akotoky@bloomberg.net
To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, Abhay Singh, Elisabeth Behrmann
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