Tata Motors’ share price experienced a significant decline of over 3%, reaching an intraday low of ₹900.25. This drop is primarily attributed to disappointing performance from its luxury vehicle division, Jaguar Land Rover (JLR), which reported a 3% decrease in retail sales for the second quarter of the fiscal year 2025 (Q2 FY25). The production issues stem from supply chain disruptions related to a key aluminum supplier, affecting the overall output and sales figures for JLR.
JLR Sales and Production Decline
In Q2 FY25, JLR sold approximately 1.03 lakh units, marking a slight decrease compared to the same quarter last year. The production was limited to around 86,000 units, reflecting a 7% year-on-year drop from the previous year’s output of 93,000 units. This decline in production has raised concerns among investors and analysts alike, as it indicates potential long-term challenges for Tata Motors in maintaining its market position.
The supply chain issues have particularly impacted JLR’s wholesale volumes, which fell by 10% year-on-year to 87,303 units. Notably, while sales increased in North America (up 9% YoY) and the UK (up 29% YoY), they declined significantly in Europe (down 22% YoY), China (down 17% YoY), and other overseas markets (down 6% YoY).
Analyst Perspectives
Analysts have offered mixed reviews regarding Tata Motors’ outlook following these developments. Emkay Global has maintained a ‘buy’ rating for the stock with a target price of ₹1,175. They emphasize structural improvements within JLR’s operations and express optimism about Tata Motors’ prospects in India, particularly with commercial vehicles. They believe that JLR is on track to become net-debt-free by FY25, which could enhance investor confidence.
Conversely, Motilal Oswal has adopted a more cautious stance, maintaining a ‘neutral’ rating with a price target of ₹990. They predict that JLR’s margins will face pressure due to rising costs associated with demand generation and the transition to electric vehicles (EVs). This could dilute profit margins over the next few years.
UBS has taken a more pessimistic view, maintaining a ‘sell’ rating on Tata Motors with a target price of ₹825. Their analysis highlights concerns about shifting market dynamics in key regions such as China, where growth opportunities have diminished significantly for global automakers.
Future Outlook
Despite the current challenges faced by JLR, there is some optimism regarding future performance. Analysts expect that both production and wholesale volumes may rebound strongly in the second half of FY25 as supply chain issues normalize. However, this optimism is tempered by concerns about demand moderation in both commercial and passenger vehicle segments within India.
Tata Motors has indicated that retail sales for the first half of FY25 were up by 3%, totaling approximately 2.14 lakh units sold. This suggests that while Q2 was challenging due to specific supply chain issues, there may be potential for recovery as conditions improve.
