Jaguar Land Rover and Parent company both take a turn for the worse in income making an unexpected Loss.

A slump in China sales at Jaguar Land Rover amid a market slowdown and a one-time expense contributed to its parent Tata Motors posting an unexpected quarterly loss.

Tata's net loss was 4.3 billion rupees ($65 million) in the quarter through September, compared with a 32.9 billion rupees profit a year earlier, the Indian company said on Friday. Jaguar Land Rover suffered a 92 million pound ($139 million) loss.

Tata took a one-time charge of 24.93 billion rupees ($377 million at today's exchange rate) on damages to JLR vehicles for China from a blast at Tianjin port where they were stored. Automakers from Toyota to Volkswagen were also hit by the blasts at a warehouse at the northeast Chinese port that killed more than 100 people and destroyed rows of brand new cars waiting to be transported to dealerships.

Jaguar Land Rover retail sales plunged 32 percent in China and Tata took an exceptional charge for about 5,800 vehicles involved in the explosion in August. The luxury unit is counting on the introduction in China of models such as the new Jaguar XF, and local production of the Range Rover Evoque and Land Rover Discovery Sport, to spur demand.

"Overall the stark compression in margins at JLR spooked us as well as the street,” Nitesh Sharma, an analyst at PhillipCapital (India) Pvt., wrote in a note. “We await clarity from the management about any one-time costs and new launch expenses during the quarter. Outlook on margins to be very critical for us to form a concrete view on the stock.”

New introductions

Tata sees a higher impact on margins with “many” new JLR introductions over the next two years, Group Chief Financial Officer C. Ramakrishnan said. The company said it will start selling a new version of the Jaguar XJ sedan in the current quarter.

Jaguar, long synonymous with sleek race cars and sedans, is joining the fastest-growing passenger car segment with its first crossover F-Pace next year and will compete with Audi’s Q5 and BMW’s X models. F-Pace is part of a Jaguar strategy to broaden out the brand that began with the mid-range XE sedan, its cheapest model and a competitor for the BMW 3 series.

The luxury unit’s retail sales in Europe and North America rose 34 percent and 23 percent respectively on demand for new models such as Discovery Sport. Tata is counting on introductions of refreshed Jaguar XF sedans and F-Pace crossovers to spur demand.

U.S. demand

Tata’s luxury unit is benefiting from demand in the U.S. where the auto industry registered its best two-month stretch of sales in 15 years. Land Rover sales in the U.S. almost doubled to 7,199 units last month, while Jaguar deliveries were broadly flat at about 1,000 vehicles.

For the year through October, Jaguar Land Rover's combined U.S. sales rose 24 percent to 67,806 vehicles. 

By contrast, demand in China for luxury vehicles has prompted some carmakers to temper expectations. Mercedes-Benz, which posted a 31 percent jump in China deliveries in the year through September, has said it now expects demand there to rise only slightly. BMW Group, the world’s biggest maker of luxury cars, posted a 2 percent gain in sales in China and Volkswagen’s Audi reported nearly level sales.

“The China market is growing again and given that we’re selling less vehicles in China than in the UK, I think we have plenty of room to grow,” Jaguar Land Rover CEO Ralf Speth said in Mumbai Friday. “The Discovery Sport began local production today. So I’m optimistic that China’s economy will begin growing again and car manufacturers will see growth.”

Industrywide passenger-vehicle sales in China increased at the fastest pace in seven months in October after the government cut a tax on some car purchases to boost sagging demand in the world’s largest auto market.

“Looking ahead we expect Chinese Range Rover/Range Rover Sport volumes to decline, and expect further moderation in pricing. But we do not expect a collapse,” Robin Zhu, Max Warburton and Yang Liu, analysts at Sanford C. Bernstein, wrote in a note to clients dated Nov. 3. “We are convinced that JLR is beginning to move past its problems of the past year” in China, they said.

REPORT HERE