Published: Sat, February 09, 2019
Business | By Eloise Houston

Tata Motors posts record $4 billion loss on Jaguar woes, shares crash

Tata Motors posts record $4 billion loss on Jaguar woes, shares crash

Ralf Speth, JLR's chief executive, said: "Jaguar Land Rover reported strong third-quarter sales in the United Kingdom and North America but our overall performance continued to be impacted by challenging market conditions in China".

The consolidated revenue of the company stood at Rs 77,001 crore, up by five percent from Rs 74,337.7 crore in the year-ago period, Tata Motors said in a regulatory filing.

The Tata Group firm reported a 8 per cent decline in domestic sales to 54,915 units in January as compared with 59,441 units in the same month previous year. The company has taken decisive steps to step up competitiveness, reduce the costs and improve the cash flows while continuing to invest in exciting products and leading edge technologies. This is Tata Motors' third consecutive quarterly loss as its luxury vehicle unit, Jaguar Land Rover (JLR) continues to struggle from Chinese slowdown and Brexit woes.

"With deliveries of the new Evoque due to start later this quarter, we look forward to building momentum". Its heavy production presence in the United Kingdom exposes it to a disorderly Brexit, the likelihood of which has risen over the past few weeks, Fitch Ratings said this week.

Given the muted demand for its vehicles JLR has concluded that the carrying value of capitalised investments should be adjusted down, resulting in a non-cash £3.1bn pre-tax exceptional charge and an overall pre-tax loss of £3.4 billion for the quarter. On Thursday, Tata said there will be no further job losses at JLR beyond those already announced.

JLR's sales, which has been contracting every month since July, fell 6.4% y-o-y in the December quarter to 144,600 vehicles.

According to Nitesh Sharma, an analyst at Phillip Capital, "we are concerned about the magnitude of equity erosion led by investment write off that could hurt debt covenants and lead to downgrades".

For JLR, the diesel weakness comes as it struggles with slowing demand in China, where it has also suffered from competitors' pressure on its relationships with dealers.

JLR, Britain's biggest automaker, is also facing disruption due to uncertainty over a Brexit deal and has made a decision to halt production for a couple of weeks in April.

"It is impossible for us to stock up production material to keep us going".

"We still believe that there will be a negotiated settlement sooner or later", Balaji added. The firm has also been buffeted by Brexit woes and weaker business for diesel cars that account for bulk of its sales in Europe.

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