India’s Tata Motors, the parent company of British luxury automaker Jaguar Land Rover, had a surprise drop in profit, mainly because Jaguar and Land Rover sales slid in China, as premium automakers are pressured to lower prices.
India’s largest automaker by revenue said its quarterly net profit for the period to March registered a slide of 56 percent, adding its dividend payment would be stopped for the first time since 2002. The company’s shares fell at least five percent after the surprise earnings hit. The firm said the first signs of recovery at home in India were negatively outperformed by the China issues, where the profitable luxury unit Jaguar Land Rover was impacted by weaker demand. Today, the British premium division brings more than 80 percent of Tata’s overall revenue. “We remain confident of the imminent turnaround in domestic business; however weak pricing environment in China is a concern and likely key to stock performance,” commented the fallout analysts.
In China, under pressure because of the drop in sales, automakers from GM to VW Ag had to lower prices or buoy discounts to counter the slower economic growth – with experts saying the trend is becoming a norm, not an exception. Analysts have been surprised by the margin pressure coming from Jaguar Land Rover, as the luxury unit has been heavily involved in the Chinese market and continues to increase its sales volumes. But the worsening figures show the group’s revenue is being shrunk by the higher dealer incentives.