Share price of Tata Motors slipped 3 per cent on S&P BSE Sensex on Wednesday to trade at Rs 156.70. The passenger and commercial vehicle manufacturer draws significant revenue from sales in China through its subsidiary Jaguar Land Rover .
On the back of closed manufacturing plants in China, Indian auto-giant Tata Motors has seen its share price drop more than 12 per cent since mid-December, when the news of the outbreak of Coronavirus in China reached ears across the globe. Share price of Tata Motors slipped 3 per cent on Wednesday to trade at Rs 156.70. The passenger and commercial vehicle manufacturer draws significant revenue from sales in China through its subsidiary Jaguar Land Rover (JLR).
JLR’s Chief Executive Ralf Speth joined the likes of Apple on Tuesday to announce that sales and supply will be hit due to the deadly virus in China that has taken nearly 2,000 lives so far. China extended the Lunar New Year holiday break due to the outbreak in Hubei province. Factories are yet to start manufacturing in China which might have a significant impact on the world in the coming quarters. According to news agency Reuters, Speth said that Jaguar Land Rover might not be able to continue production if the status quo remains in the coming weeks. “We are safe for this week and we are safe for next week and in the third week we have… parts missing,” said Speth according to Reuters. Speth also added that JLR has been flying in parts from China in suitcases to the United Kingdom.
Tata Motor’s factories in China remain closed this week and might open next week if the situation eases. The impact on revenues for the coming quarters could also be significant if normalcy fails to resume in Asia’s largest economy. “In the near term, the Covid-19 (Coronavirus) outbreak could negatively affect China region revenues of Tata Motors which accounts for 11% of consolidated revenues,” said analysts at Emkay Global in a research note. Emkay has marked Tata Motors as one of the companies that could be hurt significantly due to Coronavirus. “Tata Motors derives about 11 per cent of its consolidated revenues from the China region (on a pro-rata basis) through JLR’s exports and the Cherry JV. Assuming China volumes are impacted by 25% in the near term, consolidated EBITDA estimates could reduce by 6% and 5% in Q4FY20 and Q1FY21, respectively,” the report added.
The impact of Coronavirus will only add to Tata Motor’s woes. The company reported a 17 per cent decline in total sales at 47,862 units in January. Total domestic sales were down 18 per cent at 45,242 units as compared to 54,915 units in January last year, the company had said. Tata Motors posted a standalone net loss of Rs 1,039 crore in Q3FY20, but a consolidated net profit of Rs 1,755 helped by higher Jaguar Land Rover sales in China.