Tata Motors expects JLR demand to stay strong

Demand for JLR’s premium and luxury brand of cars are expected to remain strong in the UK, Europe and even China, despite concerns of high inflation and geopolitical uncertainties.

Wholesales or factory dispatches of JLR vehicles suffered in the June quarter due to a slower-than-expected ramp up of production of the new Range Rover and Range Rover Sport range, and severe supply constraints emanating from a chip shortage and lockdowns in China.

A 6% sequential decline in wholesales swelled the company’s order book further to 200,000 units. On Wednesday, Tata Motors reported a widening consolidated net loss to ₹4,951 crore for the June quarter, from a ₹4,450.92 crore loss a year earlier, primarily on account of pressures faced by JLR.

“The loss before tax in the quarter was £524 million before a £155 million favourable exceptional pension item. The loss primarily reflects lower wholesale volumes with weaker mix, as well as unfavourable inflation £161 million and currency and commodity revaluation £236 million year-on-year. The EBIT margin was (4.4)% reflecting the lower volumes and unfavourable mix. Free cashflow was negative in the quarter £769 million, primarily reflecting £616 million of unfavourable working capital movements," Tata Motors said in a statement.

However, with the worst of the China lockdowns and supply chain disruptions behind, JLR is expected to ramp up production to 90,000 units in the September quarter, the highest in the last five quarters.

P.B. Balaji, group chief financial officer, Tata Motors, said demand is expected to hold up well for JLR even as inflation concerns play out as the twin brands’ customer base in the premium and luxury segments is better shielded from the shocks. Moreover, Balaji said, the company is well-catered to as far as demand is concerned because of its massive backlog of orders.

Back home, Tata Motors is in advanced stages of closing a deal to acquire Ford India’s manufacturing facility in Sanand, Gujarat, for the production of its passenger vehicles. The factory will give Tata Motors an additional annually production capacity of 240,000 units .

Tata Motors is expanding production at its existing plants to nearly 50,000 units a month. The company also has “much better visibility in terms of chip availability", Balaji told reporters during a conference call.

The additional capacities will give Tata Motors the runway to produce its upcoming EV platforms Curvv (an EV-first platform) and the AVINYA ground-up EV in the next two-three years.

For commercial vehicles, Tata Motors expects demand to improve as commodity prices stabilize and construction activity rebounds. “We are expecting things to come back to normal mid- August onwards. High fuel prices and interest rates were some factors on the negative side, but we see commodity prices stabilizing and a pause in price increases, which we saw in the last two years, adding to demand stability. We are also seeing buses come back strongly now, and the M&HCV and construction segment is doing well," Balaji said.