Jaguar stutters to £3.4bn loss after demand stalls

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Brexit-related worries and a global shift away from diesel cars both in Europe and North America along with the impact of China-US trade tariffs is also hurting the maker of Land Rover Discovery and Evoque sport-utility vehicles and Jaguar XE and XF cars.

"Jaguar Land Rover is facing headwinds in multiple fronts, including geopolitical uncertainty and technological disruption apart from sluggish demand scenario in a strong market like China", said Debjit Maji, an analyst at Stewart & Mackertich Wealth Management in Kolkata, India. It added that the investment in new models and technology remains high this year because of the weak sales, that sharply contrasts with the expectations that the British vehicle maker would break even.

Jaguar Land Rover boss Ralf Speth said the one-off £3.1 billion charge was part of the firm's Charge and Accelerate transformation schemes, created to invigorate the struggling company with around £2.5 billion of investment.

Jaguar chief executive Ralf Speth said: "Jaguar Land Rover reported strong third quarter sales in the United Kingdom and North America, but our overall performance continued to be impacted by challenging market conditions in China". That compared to a profit of Rs 12bn for the same period previous year. China JV revenues stood at GBP 348 million, less than half of GBP 768 million, it had reported in the year ago quarter.

"We have five global regions around the world and we are more or less nicely balanced in terms of volume across these markets, but depending on the level of downturn in China, the impact is most likely to affect the premium auto market as a whole, no ifs or buts", Speth said.

The company had reported a net profit of Rs 1,214.6 crore in the October-December quarter of 2017-18.

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JLR's revenue, however, declined 1 per cent to 6.2 billion pounds.

One problem, according to the presentation, is JLR's dealer network.

Guenter Butschek, CEO and MD, Tata Motors, said "Fiscal year 2019 so far has been a challenging period for the industry".

The £3.1bn of the posted figures for the last quarter is the amount JLR has written off the value of its assets as it restructures and moves forward, recognising that big investments it's made - for example in diesel engine production - will not now deliver the returns once expected.

On Friday, Tata Motors and Tata Motors DVR tanked over 20 per cent each and hit a low of Rs 129 levels and Rs 71, respectively on the National Stock Exchange (NSE). "We would get constructive on JLR only when volumes stabilize in China and Brexit concerns are behind us", it said. Hence, we downgrade our rating to Neutral with a target price of Rs 166 (Mar'21E SOTP). Sales rose by a fifth year on year in the quarter in the United States and by 18% in the UK.

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