Tata Motors shares sink 29 percent after shocking Q3 results

JLR snip 1

Tata Motors shares sink 29 percent after shocking Q3 results

It is likely a recognition that previous investment in technology to build diesel-engined cars - which has long made up the bulk of Jaguar Land Rover's sales - won't be recouped due to the slump in demand for the powertrain.

Plummeting sales in China are compounding Jaguar Land Rover's challenges that include the industry's shift away from vehicles powered by petrol and diesel - a stronghold for the company.

Shares of the Tata Motors settled at Rs 151.30 on the BSE. down 17.28 percent from its previous close.

Sales in China fell 47% y-o-y last quarter offsetting 21% and 18.4% increase in North America and the United Kingdom respectively.

The firm said "significant market, technological and regulatory headwinds" were affecting the sector, while investment in new models and changing technology was still high.

Jaguar Land Rover booked a loss for the last three months of 2018 as sales collapsed in China.

The step raises questions on whether it could affect Tata Motors' credit rating that has already been revised downward in the recent past. "For Jaguar Land Rover, it will be catastrophic if Britain go for no-deal Brexit".

JLR's China retail sales nearly halved in the December quarter as overall demand in the world's biggest auto market contracted past year for the first time since the 1990s. "We continue to work closely with Chinese retailers to respond to current market conditions", he added.

The company said it was overhauling its China operation, cutting back on deliveries to reduce stock.

Kotak Institutional Equities has also maintained a "buy" rating on Tata Motors. "They are reinforcing that they are serious about achieving a turnaround, saving costs and taking measures that might be tough".

Tata Motors said it wrote down its JLR investment due to hard market conditions and expanding debt.

That compared to a profit of 12 billion rupees for the same period a year ago.

Last month, the UK's largest auto company announced plans to slash around 10% of its workforce (more than 4,500 employees globally), and JLR owner Tata Motors says the £2.5 billion (RM13.15 billion) savings from the programme will boost cash flow through 2020. This is expected to result in a one-time exceptional redundancy cost of around £200m.

Following the news, Tata Motors issued a warning that its JLR unit, will also suffer an operating loss in the year to March, a downgrade on its earlier forecast for the business which predicted that it would manage to breakeven.

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