Apparently JLR's woes are because of China, yet this week they announced massive results... mmmm

Weak demand for sleek Jaguars in China battered the profits of its parent Tata Motors, showing that the company lacked agility in a market where the appetite for luxury has ebbed.

Tata's net profit for the fiscal fourth quarter, published late on Tuesday, fell a worse-than-expected 56 percent, and India's largest carmaker by revenue also held back dividends for the first time since 2002.

Most of the decline in profits reflected key unit Jaguar Land Rover's weakness in China, where automakers are under pressure to cut prices to counter slower economic growth -- a move some analysts say is unlikely to be reversed any time soon.

Analysts say Tata Motors needs to do the same to revive volumes, though the company has no plans yet to follow suit.

"It is quite clear we will see a certain slowdown in the [China] market and we read that many competitors are going to reduce prices," company CEO Ralf Speth told analysts Tuesday, adding that the company would not be among the first to cut prices.

Slumping sales

Sales of Jaguar Land Rover vehicles in China, its biggest market, fell 20 percent in the first three months of 2015, when overall car sales in China grew 3.9 percent. That compares with Jaguar Land Rover's sales increase of 36 percent in the same quarter a year ago.

"Cutting prices will most likely bring back volumes. Whether or not they will do it is a matter of timing," said James Chao, Asia chief of IHS Automotive.

Given inventory accumulating on dealership lots, Jaguar Land Rover will need to cut its price tags eventually, whether directly or through discounts offered to dealers.

The luxury brand cut prices on some models in August, prompted by an anti-monopoly probe by the Chinese government, but its models are still more expensive than German rivals Audi and Mercedes-Benz.

The higher pricing worked in Jaguar Land Rover's favor when the Chinese economy was stronger and people were willing to pay the premium associated with imported cars, says Chao, but it is now hurting.

Made in China

Automakers have fought lower prices with increased local components and cheaper models. Jaguar Land Rover commenced sales of the locally produced Range Rover Evoque in February but its price is still not low enough.

The Evoque has a starting price of 448,000 yuan ($72,294). By contrast, the Audi Q5 starts at 358,000 yuan, while the Mercedes GLK retails for 378,000 yuan. The Q5 and GLG both are locally made.

Jaguar Land Rover hopes to revive sales with the new Jaguar XE, nicknamed baby Jag, in the crucial small luxury niche. The XE has a competitive price, but analysts note that it will lower profit margins.

Tata also faces challenges in the slow ramp-up of production at its Chinese assembly plant, a joint venture with local partner Chery Automobile Co. Troubles there have forced some analysts to downgrade their sales outlook for Jaguar Land Rover in China.

REPORT HERE