Tata Motors Ltd on Thursday forecast its United Kingdom unit Jaguar Land Rover (JLR) Automotive Plc.to incur an operating loss this fiscal year mainly because of continued muted demand in JLR's single-largest market, China.
Britain's biggest vehicle maker, owned by Indian conglomerate Tata, booked a £273 million loss in the three months to December 31, which follows on from a £90 million loss in the previous quarter.
Tata Motors took a non-cash charge of 278.38 billion rupees for an impairment at JLR in the quarter.
By 2040, more than half of all new auto sales and a third of the planet's automobile fleet - equal to 559 million vehicles - will be electric, according to Bloomberg NEF.Tata Sons Chairman N Chandrasekaran said market conditions continue to be challenging, particularly in China. "We continue to work closely with Chinese retailers to respond to current market conditions", he added.
Plummeting sales in China are compounding Jaguar Land Rover's challenges that include the industry's shift away from vehicles powered by gasoline and diesel - a stronghold for the company.
Excluding exceptional items, JLR reported a loss before tax of GBP 273 million in the third quarter, versus a profit before tax of GBP 190 million, a year ago.
"Tata Motors has bitten the bullet", Mr Ajay Bodke, the Mumbai-based head of investment strategy at Prabhudas Lilladher, said by phone.
Slumping sales at Jaguar Land Rover are giving its Indian parent company a huge financial headache. Its heavy production presence in the United Kingdom also exposes it to a disorderly Brexit, the likelihood of which has risen over the past few weeks, Fitch Ratings said in a note Wednesday.
It may be recalled that in November 2018, Moody's Global Services had changed Tata Motors" rating outlook to "negative" from "stable', citing expectations of weak operating performance of JLR.
Despite the woes, the big loss and job cuts, JLR is still investing in the future with investment in electric drive units and new battery assembly centre in the United Kingdom, has £2.5bn in the bank and an undrawn £1.9bn credit facility.
The company announced a non-cash exceptional charge to reduce the book value of capitalised investments.
Logos of the carmakers Jaguar and Land Rover are pictured during the first media day of the 78th Geneva Car Show at the Palexpo in Geneva March 4, 2008.
However, on the standalone basis, the company reported healthy quarterly numbers.
"Tata Motors domestic business continues the strong momentum and has delivered market share gains as well as profitable growth".