Tata Motors has gone into cost cutting mode after a shocker from Jaguar Land Rover and an over billion-dollar loss in 3 months
- The car and trucks maker clocked ₹10,000 crore loss between January and March 2020.
- It’s luxury car brand Jaguar Land Rover clocked a loss before tax of £422 million after two quarters of profit.
- The India revenue for Tata Motors fell a sharp 37% and the COVID-19 pandemic had very little role to play in it.
“Q1 FY21 is expected to be significantly weaker in both JLR and TML with the full impact of lockdowns being reflected in the results… Actions are underway to significantly deleverage the Tata Motors Group with JLR to become sustainably cash positive from FY22 while becoming future ready,” the company’s statement to the stock exchange said.
While the company has not mentioned layoffs or job losses, employee benefits is the biggest cost for the company, at about 11%, after the cost of inputs needed to build an automobile, which make for over half of its total cost.
Tata Motors posted a consolidated net loss of ₹9863.75 crore ($1.3 billion) for the three months ended March 2020, a sharp fall from its profits of ₹1,108.6 crore in the same quarter the previous year. Its total income fell by 27.7% from ₹87,285.64 crore at the same time.
|Jan-March 2020||Tata Motors standalone||JLR|
|Free Cash outflow||₹6,000 crore||£0.7 bn|
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 the lion’s share of the company’s consolidated revenue.
“The company will focus on conserving cash by rigorously managing cost and investment spends to protect liquidity. The company has called out a cost savings program of ₹1,500 crore and a cash improvement program of ₹6,000 crore,” the Tata Motors’ filing said.
As part of this, the company has deferred or cancelled lower margin and non-critical investment and is targeting capital expenditure of ₹ 1,500 crore in FY21, substantially lower than ₹5,300 crore in the last two financial years.
For Jaguar Land Rover, the company has now increased the cost and cash savings target for March 2021 to £1.5 billion.
The stock of Tata Motors fell 4.42% ahead of the earnings. There may be more sell-off in store after the company posted a loss that was nearly five times the market estimate.
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