JLR holds back revenue guidance, projects hit to profitability in FY26

Jaguar Land Rover Automotive PLC, the UK-based subsidiary of Tata Motors Ltd, did not give revenue guidance to its investors, even as it projected that operating profitability would suffer in 2025-26 due to US tariff hikes and a slowdown in the Chinese market.

Tata Motors' shares went into a tailspin, falling 4% during trading hours on Monday after JLR’s commentary. 

The company, which contributed 71% to its parent’s total revenue and 79% to its total operating profit in 2024-25, has guided for operating profit margin in the range of 5-7%, which is lower than 8.4% it recorded in the last fiscal, as it would face higher tariffs in North America, its largest market. 

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In its previous presentations to investors, it had projected that its operating profit margin would reach 10% by 2025-26.

JLR is also projecting a hit to its free cash flow in the current fiscal year, which is expected to reach close to zero from £1.4 billion recorded in 2024-25.

Its stated long-term vision is to reach a 15% operating profit margin. 

In 2024-25, its revenue fell 0.1% to £28.9 billion while profit after tax declined 30% to £1.8 billion. Retail sales declined 0.6% to 428,854 units.

The luxury car maker's management expects to bounce back to the growth path in 2026-27 and 2027-28 after it adapts to the impact of the global macro environment.

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In March, US President Donald Trump announced the imposition of 25% tariffs on auto-related imports. Since JLR has plants in the UK and the European Union, it paused shipments to the US in April to assess the impact of the tariffs.

Trade barriers  

While it got a partial relief after the US signed a free trade agreement with the UK in May, the outlook on tariffs from the EU still remains uncertain. Besides, even after the deal with the UK, the tariffs JLR will face in the US market are higher than what it previously faced on its exports.

“Where we stand today is that we'll pay a 300% increase on the tariffs we used to pay in the UK, so going from 2.5% to 10%. We’ll also pay a 1,000% increase on the prior tariffs on Defender and Discovery out of our EU plant,” Richard Molyneux, chief financial officer at JLR, told investors during Tata Motors’ post results earnings call on 13 May.

Analysts have noted that JLR will likely see volume contraction in the current fiscal year, which will impact Tata Motors' consolidated earnings.

“JLR is facing multiple headwinds, which include tariff-led uncertainty for exports to the US, demand weakness in key regions like Europe and China, and rising VME (variable marketing expenses), warranty and emission costs,” analysts at Motilal Oswal Financial Services wrote in a 10 June note.

Agreeing with the observations in the Motilal Oswal note, Raghunandhan NL, Manav Shah, and Rahul Kumar of Nuvama Institutional Equities said the path ahead for JLR appears to be difficult in the near term.

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“In JLR, discontinuance of ‘Jaguar’ models, loss of market share in the China region and imposition of tariffs in the US region, shall lead to a volume contraction ahead,” the analysts wrote in a 10 June note.

JLR decided in 2024 to discontinue all Jaguar models, including XE, XF, XF Sportwagon, and F-Type, barring one. It plans to make Jaguar an all-electric brand by 2026.