JLR saved the last quarter for Tata motors⁠— but the challenges in China, UK, and Europe are mounting

JLR saved the last quarter for Tata motors⁠— but the challenges in China, UK, and Europe are mounting
Tata Motors Ltd’s Nano plant at Sanand GIDCBCCL
  • Tata Motors is all set to announce its fourth-quarter results on June 15 for the quarter ending March 2020
  • In a desperate measure, Tata Motors is now also offering hefty discounts on its cars to boost sales.
  • The company was already struggling due to the new BSVI norms, and the COVID-19 crisis only made it worse.
  • Investors are still cautious as the outlook for cars seems to be a foregone conclusion as estimates, from rating agency Crisil to the one from dealers association, signal nearly a 25% drop in sales this year.
One of India’s largest automakers Tata Motors is all set to announce its fourth-quarter results on June 15 for the quarter ending March 2020. The company was already struggling due to the new BSVI norms, and the COVID-19 crisis only made it worse.

Jaguar Land Rover, which accounts for a major portion of the car market in the UK and China took a massive hit during the pandemic. JLR contributes around 82% of the total company revenue, according to last quarter earnings.

JLR saved the last quarter for Tata motors⁠— but the challenges in China, UK, and Europe are mounting
BI India
JLR sales plunged more than 30% in the past quarter, and the carmaker is now in talks with the government to secure a loan of more than £1billion (₹95 billion), according to reports. The company’s china segment also raised $705 million (₹53 billion) from Chinese lenders, its first debt financing in China.

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Amid the sluggish demand, the company also decided to keep one of Jaguar Land Rover’s key British plants in Castle Bromwich closed until at least mid-August.

The outlook for car sales this year in India seems to be a foregone conclusion as estimates, from rating agency Crisil to the one from dealers association, signal nearly a 25% drop in sales this year.

JLR saved the last quarter for Tata motors⁠— but the challenges in China, UK, and Europe are mounting
BI India

Although the coronavirus lockdown period was just for one week in the relevant period, the company’s domestic sales saw a drop of 84% in March as people preferred to wait for BSVI ⁠— new emission norms⁠— vehicles ⁠instead of picking up the last of the BSIV inventory.
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“Domestic sales in March 2020 was 5,336 units, deeply impacted by the COVID-19 lockdown as well as the planned transition to BSVI. Retail sales was significantly ahead of wholesales (>300 per cent). Almost all BS-IV vehicles in the ecosystem have been retailed, however, some await registration which was halted due to the lockdown. This will be cleared in the window provided,” the company said earlier.

Wait for management outlook

Owing to the lockdown vehicle registrations in India declined almost 89% on a year-on-year basis to 2 lakh units in May as compared to 18 lakh units last year during the same period, according to the data from Federation of Automobile Dealers Associations (FADA). In which the registration of commercial vehicles saw the steepest decline of nearly 96.63%.
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Even at home, in India, Tata Motors has had to offer deep discounts as the demand remains tepid.

Tata MotorsDiscount
Tigor₹ 45,000
Nexon₹ 3,000
Harrier₹ 45,000
Tiago₹ 28,000

On the other hand JLR is expected to burn a lot of cash this year. “we see cash burn of over GBP 1.5-2Bn in F21E and another GBP 1billion in F22E (depending on the capex rationalization in the business). More importantly, visibility of nearing FCF neutral is lacking,” stated a report from JP Morgan, dated April 14.

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However, it helps that the luxury car maker has a huge pile of cash, almost £3.9 billion (₹371 billion), on its books. But burning cash through the crisis is not going to excite investors, and that will have an impact on the share price.

JLR saved the last quarter for Tata motors⁠— but the challenges in China, UK, and Europe are mounting
BI india

The company shares price declined over 61.63% since the beginning of the fourth quarter, till March 31— one of the biggest dent in comparison to its peers.

StockSince Dec 31 to March 31
Bajaj Auto-36.50%
Tata Motor-61.63%
Eicher Motor-41.84%
M&M-46.39%

SEE ALSO: Mahindra and Mahindra sees a ₹2,700 crore dent from Ssangyong and other global subsidiaries

After Maruti and Hyundai, Tata Motors offers discounts as car makers get squeezed between slow sales and slower registrations
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