Tata Motors reaffirmed annual guidance for its British luxury carmaking arm Jaguar Land Rover (JLR), projecting stronger volumes, improved cash flow, and a reversal of earlier supply chain challenges as they look ahead to the second half of the fiscal year.
In its Q2 post-earnings analyst call, the company also acknowledged there’s limited headroom in terms of profitability, along with key challenges such as the Chinese market and recent supply chain disruptions. Tata Motors' full-year guidance for JLR's revenue remained unchanged at £30 billion, alongside EBIT margin of more than 8.5 percent and achieving a positive net cash position.
"For JLR we were held back by outside forces in Q2, particularly the flood at Nivelles, which restricted our production to 86,000 units in the quarter. The good news is even with these headwinds, we delivered robust profitability, which does show the underlying resilience of our business and we expect to bounce back strongly in H2," said Richard Molyneux, CFO, Jaguar Land Rover.
The management added that the supply chain constraints are largely over now, and they expect to increase production. Molyneux added,"In our industry, when volumes reduce, you get a double whammy hitting capital as your payables fall dramatically." Payables as per the balance sheet were under £900 million instead of the typical £1.2 billion level.
But Molyneux added that they believe it will also reverse. "So just as you get a double whammy benefit when the volumes go down, you get a double whammy improvement when the volumes go up. So those are largely the things that traverse. I think that H2 is going to be considerably better than H1," he said adding that another concern is China, but they were holding their guidance and "would do their damnedest to get there".
PB Balaji, CFO, Tata Motors Group added, "We have been absolutely paranoid about ensuring that those inventory levels are kept tight, and that has ensured that the vehicles on the cards that we are actually pushing are completely under control.".
For the longer-term fiscal outlook into FY26, the management maintained that that achieving a 10 percent margin remains possible but there were some challenges.
Passenger Vehicles
On the domestic passenger vehicle business, Shailesh Chandra, Managing Director, Tata Motors Passenger Vehicles Limited & Tata Passenger Electric Mobility Limited highlighted that their revenues declined by 4 percent on year-on-year basis, reflecting the broader slowdown in consumer demand and the moderation of optics they did to keep their channel inventory under control. "While our EBITDA margins remained steady, EBIT margins declined due to higher depreciation and amortization charges from our new product launches. This reflects the profitability trend on a year-on-year basis. The slowdown in consumer demand and high industry channel inventories have increased price discounting in the market," he noted.
Chandra added that they were able to offset much of the adverse impact through consistent mixed improvements and material cost reductions. "Our profitability has been impacted by the higher depreciation, amortization, and product development expenses," he explained adding that they haven’t been able to fully absorb these costs due to a loss in operating leverage, as some of our new launches occurred only partway through the quarter. "Their volume ramp-up is still in progress, so we haven't yet realized the full benefit of volumes there," Chandra said.
Margins in Passenger Vehicles business, the management noted, have remained steady on a quarter-on-quarter basis, while profitability in their Electric Vehicles (EV) division has shown consistent improvement. "This is thanks to reductions in battery prices and the positive impact of our new product launches," Chandra said.
Tata Motors' Q2 FY25 consolidated net profit fell 11 percent year-on-year to Rs 3,343 crore. Consolidated revenue for the July-September quarter fell 3.5 percent to Rs 1.01 lakh crore while EBITDA fell by 230 basis points to 11.4 percent.
Jaguar Land Rover’s revenue declined 5.6 percent to £6.5 billion on temporary supply constraints. For the same period, JLR’s EBIT margin fell 220 basis points to 5.1 percent. Tata Motors' domestic commercial vehicles revenue dropped by 13.9 percent to Rs 17,288 crore.
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