Tata Motors downgraded again, thanks to slow India business and ‘elevated risks’ from Jaguar Land Rover
- Global ratings agency
Fitch Ratingshas downgraded Tata Motorswith a negative outlook.
- The ratings come in because of Tata Motors Limited’s weak sales in India and the continued sluggish sales from
Jaguar Land Rover.
- Earlier in June, Moody’s too had downgraded Tata Motors.
AdvertisementAnother ratings agency has downgraded Tata Motors to ‘BB-’ with a negative outlook. Fitch Ratings has downgraded the automaker as with lesser chances of “TML's profitability and free cash generation in the next two to three years”.
Tata Motors is impacted due to its UK-owned subsidiary Jaguar Land Rover, which has become a white elephant for the company.
“Uncertainty around an orderly outcome of Brexit negotiations and the evolving global tariffs situation pose risks, in particular to TML's JLR business, which faces a significant level of production-sales mismatch due to concentration of its production base in the UK,” said the report.
In addition to JLR related troubles, Tata Motors’ domestic business is also troubled by a general slowdown in the auto market.
Tata Motors too has been witnessing a slowdown in its sales in India, as has been the case with the Indian auto market. In June 2019, Tata Motors reported a 14% decline in India sales, while a 5% drop was seen in global sales.
Cumulatively, Tata Motors sales in the first quarter of 2019-20 fell by 20%.
A month back, credit rating agency Moody’s had downgraded Tata Motors with a negative outlook. Tata Motors’ shares fell 3% after the downgrade.
The Fitch Ratings report mentioned that another reason for its downgrade was that “JLR faces elevated risks.”
Jaguar Land Rover’s global sales continued to decline in May with the company reporting a 12% dip in May 2019. In June 2019, its sales dropped by 9.6% year-on-year.
Brexit, US-China trade war and signs of a slowdown in the global economy could be the reasons for the losses incurred by JLR. China has traditionally been one of the biggest markets for the luxury car. JLR's sales volumes in China too massively by 29% year-on-year in the first quarter of FY20.
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