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RICHES TO RAGS

Brexit and China are really hurting India’s largest automaker

Reuters/Vivek Prakash
Disappointing turnout.
By Kamalika Ghosh
Published Last updated This article is more than 2 years old.

After Brexit, China has come to haunt India’s largest automobile maker by revenue.

On July 31, Tata Motors posted its worst quarterly results in nine years. The company incurred losses of Rs1,863 crore ($27.19 million) for the April-June (pdf) quarter—down 19% from the same period in the previous financial year—on revenue of Rs67,081 crore.

Its performance was dragged down by the £210 million ($275 million) loss posted by Jaguar Land Rover (JLR) largely due to its poor show in China, the UK, and Europe. The luxury car unit, which Tata Motors acquired in 2008 for $2.4 billion, has been the company’s cash cow in recent years, accounting for around 90% of its revenue.

JLR’s sales in China took a beating on account of stock clearances by dealers and consumers stalling purchases ahead of a reduction in import duties, the company said in a statement.

The British car maker, though, remains hopeful of upping its game. “We expect sales and financial results to improve over the remainder of the financial year, driven by continued ramp-up of new models, most recently the electric Jaguar I-PACE, and with the new lower duties effective in China,” Ralf Speth, CEO of JLR, said in the statement.

The slump in China comes at a time when JLR is still tackling Brexit.

If Britain ends up leaving the European Union without a free trade agreement, assembling cars in the UK is estimated to get costlier by 10%. Earlier in July, JLR had warned that a bad Brexit deal would cost it over £1.2 billion in annual profit.

Besides Brexit, the entire diesel car segment, too, has been under pressure in the UK as car makers are shifting to electric models following the Volkswagen diesel scandal that broke out in 2015.

But there is hope that JLR’s planned car launches will salvage its performance. “It (JLR) has a good pipeline of products. They are concentrating on technological growth and innovation. So its unlikely that their rough patch will continue,” said Gaurav Vangaal, senior analyst at information provider IHS Markit.

JLR is also looking to cut costs to improve its balance sheet.

Meanwhile, in India, Tata Motors is set to launch its sports utility vehicle, Harrier, in the first half of 2019. Unveiled at the 2018 Delhi auto expo, the car will be developed in collaboration with JLR. The company is expected to invest $1 billion in its passenger vehicles segment over the next three years. As part of the plan, it will open a new manufacturing plant in Pune.

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