Tata Motors plunges; what's behind recent underperformance?
Tata Motors shares tumbled 4 percent on Thursday morning on reports that stringent new emission norms in China could hurt sales of its luxury Jaguar Land Rover unit.
March 22, 2013 / 08:39 IST
Moneycontrol Bureau
Tata Motors shares tumbled 4 percent on Thursday on reports that stringent new emission norms in China could hurt sales of its luxury Jaguar Land Rover unit.According to new fuel economy rules announced on Wednesday passenger cars' average fuel consumption would be cut to 6.9 litres per 100 kilometres by 2015 and to 5.0 litres by 2020 in China.Further, new National V emission norms, based on Euro V standards kicked in Beijing earlier this month in a bid to curb pollution, which hit record levels in Jan. According to the new norms, vehicles running on petrol that didn't meet the new norms would be barred from sale in the city, reports say. The new emission norms will aim to reduce sulphur, nitrogen oxide, and carbon monoxide among other things. The new norms will be gradually extended to the entire country by 2017, according to another news report."...New regulation aims 20 percent fuel economy drop from the phase II standard. We await more details, but it seems Jaguar Land Rover will be negatively impacted," according to a note by a foreign brokerage.China is a big market for luxury automobile makers. It accounts for 20 percent of JLR's revenue.JLR is building a new manufacturing plant in China in joint venture with local automobile maker Chery."In our view, 50 percent of sales in China would be compliant with the new norms by 2015. For the rest, the company may have to do capex to make them compliant," the note said. Tata Motors shares have been under pressure over the last few days on the back of sluggish sales growth in Feb. The UK headquartered JLR's sales last month rose just 3 percent as 22 percent slump in China sales offset growth in other regions. JLR had said that retail sales in China plunged due to Chinese new year holidays, which led to lesser selling days.In the domestic market the company's market share has slipped below 5 percent and passenger car and commercial vehicle sales remain under pressure due to the overall slowdown in the economy, coupled with expensive loans and high fuel prices. The company also hasn’t had any significant new launch in its passenger car business in last couple of years.Separately, CNBC-TV18 quoting sources reported on Thursday that JLR is exploring options to raise up to USD 1 billion via a bond issue in Hong Kong. Timeline for the bond issue would be around June-July, and the capital raised will be used for its planned UK expansion Chinese joint venture, the report said. Tata Motors shares have declined near 8 percent in the last 10 trading sessions. The stock was down 3.1 percent at Rs 276.95 on NSE in noon trade.Nachiket Kelkar
Nachiket.kelkar@network18online.com
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