Jaguar Land Rover is dragging Tata Motors along in its downward spiral
- Credit rating agency Moody’s downgraded
Tata Motorscontinuing with a negative outlook for the company.
- Tata Motors shares fell by 3% after the Moody’s report.
- The decline in Tata Motors comes from the continued sluggish sales from
Jaguar Land Rover.
Global ratings agency Moody’s believes that Jaguar Land Rover will probably default on its loans.
"The downgrade reflects
Tata Motors’ shares fell 3% on Friday after the downgrade.
Jaguar Land Rover global sales continued to decline in May with the company reporting a 12% dip in May 2019. 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, which has traditionally been one of the biggest markets for the luxury car.
For the quarter ending December 31, Tata Sons’ Jaguar Land Rover saw a loss of $3.4 billion following a big write-down. It was also in cost cutting mode, and reportedly axed 4,500 jobs late last year.
"The downgrade reflects our expectation that it will take longer than we had previously expected for the company's free cash flows to return to positive territory," said Kaustubh Chaubal, Moody's Vice President and Senior Credit Officer, adding that rising competition, the potential for a 'no-deal' Brexit, and the possibility of US tariffs cast bigger shadows on the company's prospects.
JLR is landing heavily on Tata Motors which is facing challenges in the Indian market which is now facing sales slowdown leading to overcapacity in the market, as the number of auto dealers are shrinking.