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Jaguar's China woes push Tata Motors shares to its lowest level in a decade

Parent company writes down its investment in Jaguar Land Rover by US$3.9 billion

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Tata Motors shares had already lost more than 50 per cent in the past 12 months on concerns about Jaguar Land Rover's waning sales, profitability, high capital-expenditure need and the impact of Brexit.

Mumbai

THE China slowdown sending tremors through the business world has resulted in the biggest record loss in India's corporate history.

Tata Motors Ltd shares had their biggest drop in 26 years in Mumbai trading after the company unveiled a writedown in its luxury Jaguar Land Rover Automotive Plc unit. The decline of as much as 30 per cent was the biggest since February 1993 on intraday basis and sent Tata Motors shares to their lowest level in almost a decade.

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. Another wild card is its heavy production presence in the UK that exposes it to a disorderly Brexit, should that occur.

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Market voices on:

"Jaguar Land Rover is facing headwinds on multiple fronts, including geopolitical uncertainty and technological disruption apart from sluggish demand scenario in a strong market like China," said Debjit Maji, an analyst at Stewart & Mackertich Wealth Management in Kolkata, India. "For Jaguar Land Rover, it will be catastrophic if Britain go for no-deal Brexit."

Tata Motors shares were down 18 per cent at 150.65 rupees as at 1.23 pm on Friday in Mumbai. They had already lost more than 50 per cent in the past 12 months through Thursday on concerns about Jaguar Land Rover's waning sales, profitability, high capital-expenditure need and the impact of Brexit.

Carmakers around the planet are getting hurt by the slump in China, whose car market shrank for the first time in more than two decades last year. Daimler AG and BMW AG reduced profit forecasts last year amid pressures from the US-China trade war that's hit auto demand, while Hyundai Motor Co said last month it's letting workers go as it reviews production plans in the world's biggest market.

The "overall performance continued to be impacted by challenging market conditions in China," Ralf Speth, head of Jaguar Land Rover, said in a statement on Thursday. "We continue to work closely with Chinese retailers to respond to current market conditions." The company said it's overhauling its China operation, cutting back on deliveries to reduce stock. It's also streamlined its commercial policies to help compensate for retailers' losses, and launching extensive on-site training programmes to improve the customer experience as well as operations.

Tata Motors wrote down its investment in Jaguar Land Rover by US$3.9 billion due to market challenges, especially in China, technology disruptions and rising debt costs. The parent's net loss was 270 billion rupees (S$5.1 billion) in the three months through December, exceeding the deficit reported by Indian Oil Corp in 2012.

"Tata Motors has bitten the bullet," Ajay Bodke, the Mumbai-based head of investment strategy at Prabhudas Lilladher Pvt Ltd said by phone. "They are reinforcing that they are serious about achieving a turnaround, saving costs and taking measures that might be tough."

As part of Jaguar Land Rover's plans to achieve £2.5 billion (S$4.4 billion) of investment, working capital and profit improvements by March 2020, the company in January said it would slash its global workforce by 4,500. BLOOMBERG