Tata Motors’ Jaguar Land Rover unit is a major casualty of the US-China trade war

  • JLR said that its sales in China fell by 46% in September owing to uncertainty and weak consumer demand in the light of trade tensions and import duty changes.
  • Tata Motors derives nearly 80% of its revenues from JLR. Hence, its results are highly dependent on that of the UK luxury vehicle brand.
  • As concerns over a US-China trade war mount, JLR is shutting down production at its facility in Solihull, UK for two weeks.
The last few years have been a mixed bag for Tata Motors in terms of commercial performance as its fortunes have been directly tied to its UK luxury car business, Jaguar Land Rover (JLR), which provides a bulk of its revenues and profits. For example, in the year ended March 2018, the unit comprised 77% of Tata Motors’ revenue from automotive operations. When JLR does well, Tata Motors does well and vice versa.

As demand has slumped in the UK and Europe amid Brexit uncertainty, JLR had pinned its hopes on the luxury vehicle market in China. Last year, it set up a manufacturing facility in the city of Changshu through a joint venture with Chery Automobile Ltd. The unit posted record sales in China in 2017, with sales up 23% to 146,399 units.

However, the US-China trade war has significantly hurt JLR’s sales this year, and by extension, has dragged down Tata Motors’ performance. On 8 October, JLR announced that its global sales fell by 12% in September, driven by a 46% plunge in sales in China owing to the uncertainty and weak consumer demand in the light of trade tensions and import duty changes.

The results caused Tata Motors’ share price on the Bombay Stock Exchange to fall by nearly 14% to ₹186 - the lowest level since mid- 2012.

Earlier this year, Tata Motors posted its worst quarterly result since 2009 as JLR’s sales in China plummeted. For the quarter ended June 2018, JLR reported a loss of £210m, causing Tata Motors’ net loss for the period to widen to ₹18.6 billion.

As concerns over a US-China trade war mount, Tata Motors is responding to the decline in Chinese demand by lowering production and cutting costs where it can. The Indian carmaker has decided to shut down production at its manufacturing facility in Solihull, UK for two weeks this month. Last month, JLR said its plant in Castle Bromwich would transition to a three-day workweek from October to December.
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