Tata Motors chairman N Chandrasekaran on Tuesday said that the company is examining various options around its UK-arm Jaguar and Land Rover (JLR), which has been hit by volume slowdown and mounting losses.
Tata Motors chairman N Chandrasekaran on Tuesday said that the company is examining various options around its UK-arm Jaguar and Land Rover (JLR), which has been hit by volume slowdown and mounting losses, including meeting multiple private players and looking for partnerships in China to lessen the financial burden on the group’s bottom line.
Speaking to the shareholders at the company’s 74th annual general meeting, Chadrasekaran highlighted that the automobile sector is capital intensive and demands continuous investment in product and technology. He said that more than the final outcome of the Brexit, it’s the continuing uncertainty that is hurting JLR in its home market of UK and continental Europe, which is the largest source market for a lot of parts that JLR procures annually.
“The only way to handle the ongoing crisis and the continuing need for large capex is additional investment through partnerships, because we want to spread the investment, which cannot be shut either. “There are many discussions from tactical to strategic for such partnerships. Opportunities are coming and we keep evaluating them and as long as it is in the interest of Tata Motors. We will forge such partnerships so that we are able to address the capex issue,” Chandra said.
He also said, “Meetings are happening with multiple players for JLR; will go ahead if something works out in the interest of Tata Motors,” a business news channel quoted him as saying.
Last week, Tata Motors reported a debilitating operational loss of Rs 3,679 crore for the three months to June even as it braces for more challenges due to Brexit and a sharp slowdown in global automobile sales.
The company’s earnings came under pressure impacted by the 395 million pounds loss posted by JLR. With industry volumes down in most regions, JLR reported a 11.6% decline in its global retail sales to 128,615 vehicles for the quarter. China, reported an over 29% decline in volumes during the quarter. Additional plant shutdown time and delays resulting from Brexit contingency planning also contributed to the lower sales and profits.
Senior management have highlighted that the cash flows at JLR are expected to remain negative for the full year on account of continued investments in the luxury car maker, while the profit before tax though positive will remain in the lower band of the guided range.
Chandra said on Tuesday that JLR has seen its volume plunge around 50% in China, which was its biggest market till the general economic slowdown hit the world’s largest auto market since the past two years. However, he said that there is some silver lining in China, whether it is a trend needs to be watched out for.
He said during the past 12-18 months, JLR has cut down capex from around 4.5 billion pounds to 3.9 billion pounds. And the company is working towards cutting down further, however, it cannot take a very drastic cut. On the Brexit, he said, “more than the impact of Brexit, it is the uncertainty of its potential impact, and this is much higher on JLR than any other company.
“The real concern is if Brexit were to happen with or without a deal, what will be the impact on our supply chain. We import millions of components from other parts of the world, particularly Europe. In the situation of Brexit, there’s a possibility of a supply chain breakdown, which essentially means production cannot happen, inventories are to be maintained,” he said.