Tata Motors’s quarterly profit plunged 97 per cent after margins at its luxury Jaguar Land Rover (JLR) unit narrowed and costs surged.
The company posted net income of 937.7 million rupees (Dh51.4m) in the three months that ended in December, Mumbai-based Tata Motors said on Tuesday. That compares with the 22.6bn rupee average of analysts’ estimates compiled by Bloomberg. Profit at its Jaguar Land Rover luxury unit fell 62 per cent to £167m (Dh764.5m).
The decline in earnings comes as Tata Motors contends with potential fallout from a proposed US border tax on imported cars and Britain’s withdrawal from the European Union. The Jaguar Land Rover unit is vulnerable because it does not have factories in the United States and sells much of its United Kingdom output abroad. The unit’s operating profit margin narrowed to 9.3 per cent from 14.4 per cent a year earlier, according to Tata.
“JLR had lower wholesale volumes,” said C Ramakrishnan, the chief financial officer of Tata Motors in Mumbai. “JLR margins would definitely be better in the fourth quarter, hopefully on the back of the new launches that we have.”
To offset the impact of a border tax now being studied by the Trump administration, Jaguar Land Rover would need to raise prices by more than US$17,000 per vehicle, according to West Bloomfield, an analyst at Michigan-based Baum & Associates This compares with the smallest price increase of about $282 for Ford.
The rupee strengthened about 15 per cent against the British pound last year, eroding the repatriated earnings from the luxury unit, which contributes about 86 per cent of Tata Motors’ operating profit. An increase in tax expense to 8.67bn rupees from 6.69bn rupees also weighed on earnings, according to the company.
Land Rover’s sales declined 8.7 per cent in the quarter as demand for its Discovery sport utility vehicle waned. Its spending on incentives and marketing promotions in the US more than doubled last year, according to Autodata.
* Bloomberg
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