Tata Motors profit declines as JLR margins shrink on discounts; outlook clouded

Tata Motors Ltd reported a decline in annual net profit on Tuesday, as its British luxury car unit Jaguar Land Rover (JLR) faced margin pressures and the Indian automaker refrained from giving future guidance for the subsidiary citing global trade uncertainties fuelled by Trump tariffs.

The country’s largest passenger vehicle maker recorded a muted 1.3% growth in revenue to ₹4.39 trillion in FY25, as sales fell globally.Earnings before interest, taxes, depreciation, and amortization, or Ebitda, margin fell 100 basis points to 13.1% due to a decline in margins of JLR owing to higher discounts.

As a result, net profit for the full year fell 11% to ₹28,100 crore, from ₹31,800 crore in FY24.

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Tata Motors' Q4 revenue edged up 0.4% to ₹1.19 trillion, but profit more than halved to ₹8,600 crore. This sharp profit drop is partly due to a prior-year accounting boost: in January-March of 2024, Tata Motors recognized an ₹8,300 crore deferred tax asset, inflating that quarter's profit. The current quarter reflects a return to normal accounting.

Challenging environment

“In this challenging environment, Tata Motors was able to deliver highest-ever revenue and profit before tax (business earnings in India). The automotive business has also become net debt free,” P.B. Balaji, group chief financial officer at Tata Motors said in a post-results media briefing.

Tata Motors' shares settled 1.8% lower at ₹707.90 apiece on BSE on Tuesday.

Jaguar Land Rover's FY25 revenue was steady at £28.9 billion, accounting for about 69% of Tata Motors’ overall revenue. The British firm’s Ebitda margin also declined by 160 basis points to 14.3% during the year.

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"A major concern for the company would be international challenges but a positive is the fact that JLR continues to be profitable. Domestically, the company has to watch out for rising competition eating into its market share," Saji John, senior research analyst at Geojit Financial Services, said.

Tata Motors acquired the British luxury car brand for $2.3 billion in 2008.

The British brand has had to deal with a tough environment as tensions flared up between the United States and other countries as the Trump administration imposed 25% import tariffs.

Partly beneficial

The company will partly benefit from the US-UK trade agreement, which brings down tariffs to 10% from the current 25%. However, the rate still remains higher than 2.5% tariffs auto imports attracted before.

Slowdown in sales of Tata Motors was visible in the decline in volumes globally. The firm's investor presentation showed that global sales declined 3% to 366,000 units in the January-March period.

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The company believes that the global premium luxury segment and Indian domestic markets will be able to withstand the uncertainties.

“Demand in the United Kingdom is expected to pick up further. The outlook for Europe is also looking better,” Balaji said during the call.

Outlook unclear

However, the company shied away from giving the exact outlook on the impact of global headwinds on Jaguar Land Rover as the situation is still evolving. However, the management maintained that there will be no changes to investment plans for the year ahead

“There are still some details which need to be clarified before we are able to give the exact picture on impact on Jaguar Land Rover,” Balaji told reporters.

Jaguar Land Rover, which gets about one fourth of its sales from the North American region, paused shipments to the region in April. The exports since then have resumed but the impact on its revenue and profit remains unclear.

On the domestic front, the passenger vehicle division of Tata Motors recorded a 7.5% decline in revenue to ₹48,445 crore in FY25 amid a 3% fall in total sales to 556,263 cars. Similarly, the commercial vehicle segment also recorded a 4.7% fall in revenue to ₹75,053 crore.

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