Tata Motors share price declines 3% as supply constraints hit JLR Q2 wholesales; analysts cut estimates

Stock Market Today: Tata Motors share price declined 3% in the morning trade on Tuesday, October 8, following a drop in wholesale sales of Jaguar Land Rover (JLR) during the September quarter of financial year 2024-25 (Q2 FY25).

Tata Motors share price opened at ₹918.10 on the BSE today, more than 1% lower than its previous close of ₹928.10. Tata Motors share price thereafter declined to ₹893.90, marking a correction of over 3%

Supply constraints impact production, wholesales

Tata Motors in a release on Monday said that JLR wholesales in Q2 FY25 stood at 87,303 units, down 10% year-on-year (YoY). Analysts attributed the decline to supply constraints.

Production of Jaguar Land Rover, a subsidiary of Tata Motors, was limited to 86,000 units (down 7% YoY), primarily due to supply disruptions from a key high-grade aluminium supplier, which impacted several original equipment manufacturers (OEMs).

Furthermore, around 6,500 vehicles, mostly in the UK and European region, were placed on a temporary hold at the end of September to allow additional quality control checks to be performed, the company said in a filing.

Furthermore, the retail sales stood at 103,108 units in the second quarter (including the Chery Jaguar Land Rover China JV), down 3% compared to the same quarter a year ago.

However, JLR expects both production and wholesale volumes to improve and pick up strongly in the second half of the financial year with the normalisation of the aluminium supply situation. On the positive side, the overall mix of the most profitable Range Rover, Range Rover Sport and Defender models was 67% of total wholesale sales.

Analysts cut Q2 estimates

Based on the above Q2 wholesale volumes for JLR, analysts at Motilal Oswal Financial Services (MOFSL) tweaked their Q2 FY25 revenue, earnings before interest tax depreciation and amortisation (EBITDA), and net profit estimates for JLR by 5.8%, 3.03% and 8.2%, respectively.

Their Q2 FY25 estimates for consolidated revenue, EBITDA and net profit now stand at around ₹96,240 crore, ₹12,950 crore and ₹404 crore, which are lower by around 4%, 2.4% and 5.3%, respectively compared to the earlier estimates.

Near-term challenges

While Tata Motors posted a robust performance in FY24, analysts remain watchful as they see near-term headwinds.

Motilal Oswal Financial Services expects JLR margins to remain under pressure over FY24-FY26, given the rising cost pressure as it invests in demand generation, normalising mix, and EV ramp-up, which is likely to be margin-dilutive.

Indian passenger vehicle sales remain strong but industry demand has been moderating . The demand for commercial vehicle sales remains moderate as per analysts. Analysts at MOFSL have, therefore, factored in flat margins for the Indian business over FY24-26.

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