Published: Sun, February 10, 2019
Money | By Ralph Mccoy

Should you sell Tata Motors post Rs 26,960 crore Q3 consolidated loss?

Should you sell Tata Motors post Rs 26,960 crore Q3 consolidated loss?

Considering the flawless storm of woes engulfing JLR at the moment - from the damning of diesel to a slow down in China, from a loss of love for saloon cars to Brexit confusions - performance in the last quarter could have been a lot worse, with sales of £6.2bn down from £6.3bn and numbers down from 154k to 144k.

But analysts expect JLR to struggle to generate profit with China's economy projected to slow further this year after growth eased to its weakest pace in nearly three decades in 2018. The rating company has placed Tata Motors on negative credit watch. U.S. sales rose 20 per cent and 18 per cent in the UK.

Fresh from announcing a factory shutdown as a result of Brexit, Jaguar Land Rover could also now have its credit rating downgraded as a outcome of Britain's impending exit from the European Union.

Closer to home, Jaguar Land Rover has felt the collapse in diesel vehicle sales in Europe in the wake of Volkswagen's emissions scandal.

"The automotive industry is facing significant market, technological, and regulatory headwinds".

Carmakers have been on the frontline of economic pressures in the world's second-largest economy as growth slows, with sales falling in China for the first time in nearly three decades during 2018.

While Tata Motors has announced plans to turn around JLR, the slide in the unit's sales has continued for now with retail sales in China falling almost 50 per cent during the quarter ending December 31. "We continue to work closely with Chinese retailers to respond to current market conditions", he added.

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Tata Motors has bitten the bullet.

The company said it was overhauling its China operation, cutting back on deliveries to reduce stock.

Tata Motors said it wrote down its JLR investment due to hard market conditions and expanding debt. "They are reinforcing that they are serious about achieving a turnaround, saving costs and taking measures that might be tough".

JLR, which is owned by India's Tata conglomerate, expects the malaise to drag on and has booked £3.1bn of asset write-downs to reflect lower anticipated profits, sending it down to a £3.4bn loss.

The company has axed more than 6,000 jobs in recent months as part of a $3.2 billion cost-cutting plan, and a year ago put 1,000 of its United Kingdom workers on a three-day work week.

This is expected to result in a one-time exceptional redundancy cost of around £200 million for the luxury unit of Tata Motors.

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