Mumbai: Tata Motors Ltd-owned Jaguar Land Rover Automotive Plc (JLR) is showing early signs of recovery in sales volumes on the back of refreshed models. The British auto maker had witnessed a severe downturn during the quarter to March, owing to a model rundown cycle.

Following the launch of the new Range Rover Velar and Land Rover Discovery SUVs, and the compact Jaguar SUV E-Pace, the firm’s sales rose 11.87% and 6.14% in April and May, respectively. The UK’s largest auto maker said in a 7 June release that April sales were at 45,180 units, while in May the firm sold 48,281 units.

However, the more established models, which have not received a facelift, were still weighing down on sales, with only five out of the 13 JLR cars witnessing sales growth during the period.

JLR sales slowed during the December quarter, with a mere 3.45% rise from a year ago to 154,447 units, while sales in the quarter ended March had fallen by 3.8% to 172,709 units.

Between April and May, JLR did well across markets, except in Europe. The firm’s UK sales were back in the black with a 3.4% rise. And, despite the Chinese deferring their buying decisions with the government expected to cut import duty on cars from 25% to 10%, effective 1 July, analysts said the 12% growth witnessed in China (on an adjusted basis) was “significant".

“China is a key market for us and we welcome the reduction in import tariffs announced in May," said Felix Brautigam, chief commercial officer, JLR. He added that the deferring of purchases “will be temporary and will further strengthen demand".

JLR will begin retailing the E-Pace compact SUV in China in August, which is also expected to boost sales.

Analysts estimate sales to rise in the low single-digits this fiscal year and low double-digits in FY20 following the launch of new models and the import duty cut in China, where customers are expected to hold off the purchases in June as well. However, sales in the US, UK and Europe are expected to weaken in the current financial year due to several factors, including cyclicality in demand, rising competition in the premium SUV segment, and the uncertainty over taxation on diesel vehicles, besides Brexit.

In a 1 June note, Jinesh Gandhi, senior vice president, equity research, Motilal Oswal Securities Ltd, said that over the next one to two years, several factors will drive an improved operating performance at JLR on the back of a “demand recovery as the base normalises and the full benefit of new launches reflects in FY19".

A continued moderation in foreign exchange, hedging losses in the first half of FY19 and lower costs at the newly-established Slovakia plant, will also support profitability, he added.

Since JLR accounts for a lion’s share of its parent Tata Motors’ profit, it is of no surprise that the scrip has lost nearly 21.2% since October 2017. Weak JLR numbers during the December and March quarters had resulted in a lower-than-expected consolidated net profit for Tata Motors. With the revival in fortunes of the British subsidiary, Gandhi of Motilal Oswal sees “a very favourable risk-reward scenario for the scrip, with a worst-case downside of close to 13% and a base case upside of about 66%, at current prices".