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Tata Motors Net Misses Estimates as Jaguar Growth Slows

Tata Motors Ltd. (TTMT), India’s biggest automaker, posted profit that missed analyst estimates as sales growth at its Jaguar Land Rover Ltd. unit slowed.

First-quarter net income fell 23 percent to 17.3 billion rupees ($282 million), the Mumbai-based company said. That missed the 22.2 billion-rupee median of 39 analysts’ estimates compiled by Bloomberg. Profit at the Jaguar Land Rover luxury unit rose 29 percent to 304 million pounds ($470 million).

Retail sales at the luxury unit, which Tata Motors bought from Ford Motor Co. (F) in 2008, rose 10 percent in the three months ended June, slower than the 17 percent pace in the previous quarter. Deliveries of cars and commercial vehicles at the local business fell 19 percent, as customers in India held off purchases on expensive loans and slowing economic growth.

“Earnings are far below the street expectations and going forward the road doesn’t look smooth for the company,” Jigar Shah, an analyst at Kim Eng Securities Pvt. in Mumbai, said by phone. “A Chinese slowdown will weigh on JLR’s performance. We’ll have to wait and see if the company revises its sales target for the country.” Shah has a sell rating on Tata Motors.

China, the biggest market for Tata Motors’ luxury unit, plans to widen the number of cities curbing auto purchases to fight pollution and congestion, threatening vehicle sales, the government-backed car association said last month. Expanding restrictions on vehicle purchases would follow a cash crunch that sent interbank borrowing costs to record levels in June and a slowing economy.

Tata Motors fell 3 percent to 278.90 rupees at the close in Mumbai yesterday, the lowest level since June 27. The stock was the biggest loser on the benchmark 30-company S&P BSE Sensex Index, which declined 0.4 percent.

India Slump

Passenger vehicle deliveries at Tata Motors’s home market have dropped for 11 straight months as promotions to buy back the Manza sedan and credit card purchases of the Nano, the world’s cheapest car, failed to lure buyers. Intensifying competition and slowing growth in Asia’s third-largest economy cut demand for the company’s vehicles.

Sales at the India business declined 14 percent from a year earlier to 90.4 billion rupees and the parent posted an operating loss of 3.94 billion rupees.

“The standalone entity will be a big drag on Tata Motors,” Mahantesh Sabarad, an analyst with Fortune Financial Services Ltd. in Mumbai, said before the earnings announcement. “JLR volumes are also decelerating.”

Jaguar Boost

Jaguar accounted for 17,459 units of the luxury unit’s deliveries last quarter, an increase of 28 percent spurred by the new F-Type convertible introduced in May. Land Rover sales rose 7 percent to 77,260 vehicles, according to company data.

Sales of Jaguar Land Rover climbed 13 percent to 4.1 billion pounds, according to the statement. The luxury unit based in Gaydon, England plans to introduce eight new or refreshed models this year, Jaguar Land Rover Chief Executive Officer Ralf Speth said in May.

The luxury unit is turning to emerging markets such as China, Russia and South Africa to pursue growth. Global retail sales in the three months ended June rose to 94,719 vehicles, with those in China increasing 11 percent to 20,427 units, according to company data. China was the company’s largest market, according to the data, followed by Europe.

The luxury unit, together with Chery Automobile Co., is investing 10.9 billion yuan ($1.78 billion) to build a manufacturing plant in eastern China. The venture will include a local brand as well as a research & development center and an engine plant.

“Our ambition is to sell about 100,000 cars in China this year,” Speth told reporters yesterday. “This is an ambitious target but nevertheless we think we can achieve it as the economy in China is still strong.”

To contact the reporter on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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