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Jaguar owner posts biggest quarterly loss in India on China car slump
[MUMBAI] The Indian owner of Jaguar Land Rover Automotive reported the biggest quarterly loss in the country's corporate history because of a charge stemming from a slump in China's car market that's hit carmakers around the world.
Tata Motors Ltd'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.
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. Its heavy production presence in the UK exposes it to a disorderly Brexit, the likelihood of which has risen over the past few weeks, Fitch Ratings said this week. The rating company has placed Tata Motors on negative credit watch.
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."
Tata Motors' American depository receipts fell 9.5 per cent to US$11.40 in New York. Its shares have slumped 51 per cent in the past 12 months in Mumbai 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.
Jaguar Land Rover 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 compared with a profit of 12 billion rupees a year earlier, and also missed the average analyst estimate that called for a profit.
"Tata Motors has bitten the bullet," Ajay Bodke, the Mumbai-based head of investment strategy at Prabhudas Lilladher Pvt Ltd said. "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. This is expected to result in a one-time exceptional redundancy cost of around £200 million for the luxury unit of Tata Motors. The cost of the voluntary scheme will be recognised in the quarter ending March 31, the company said.