Speed breaker for Tata Motors

Tata Motors was the biggest loser among the Sensex companies falling 3.28% to Rs1,033.05 on Friday.

This was due to the below expected sales volume registered by luxury brands Jaguar Land Rover (JLR). Markets had expected 8-10% growth from JLR.

JLR sales for June were flat mainly due to a sharp 40% year-on-year drop in sales of Jaguar brand overshadowing a creditable 22% growth in sales of Land Rover.

Management themselves have aired their disappointment on the drop in sales which has resulted in a 3% year-on-year consolidated growth in net profit for the first quarter. Market expectation was 15-20% growth in the first quarter bottom line numbers.

High dependence on European market has resulted in a sharp drop in Jaguar volumes. On a month-on-month basis, sales declined 4%. Jaguar has performed poorly in its segment compared to products like Volkswagen Audi, BMW and Daimler which has posted a growth of 19%, 12% and 6%, respectively.

Land Rover sales were robust at 22% on year-on-year basis. However, Land Rover sales declined 10% on a month-on-month basis, which was poorer than Jaguar.

Tata Motors has pointed out that the performance was affected by wholesale volume which dropped 8.7%. Retail sales performance was flat during the period.

With the domestic market slowing down due to high input cost and high interest rates, analysts were banking on JLR sales. Now, a flattening of growth will raise alarm bells and probably lead to further downgrades. Friday’s drop seems to be the first of a few more that can be witnessed in the stock in the short term.