Jaguar Land Rover on credit rating watch

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Auto manufacturers across the world are facing many challenges, from the transition to electric vehicles, Brexit uncertainty and regulatory pressure on demand for diesel.

"Fiscal year 2019 so far has been a challenging period for the industry". Big asset impairment dragged Tata Motors into consolidate loss. Domestic revenue at Rs16,208 crore for the quarter was up 1.5 per cent, it said, adding that its market shares for CVs was up 60 bps compared to FY 18 while sales of personal vehicles were up 50bps.

Fresh from announcing a factory shutdown as a result of Brexit, Jaguar Land Rover could also now have its credit rating downgraded as a outcome of Britain's impending exit from the European Union.

Diesel vehicles account for just under 90% of Jaguar Land Rover's sales in Europe at a time when consumers are increasingly choosing more environmentally-friendly options.

"Jaguar Land Rover is facing headwinds on multiple fronts, including geopolitical uncertainty and technological disruption, apart from a sluggish demand scenario in a strong market like China", said analyst Debjit Maji at Stewart & Mackertich Wealth Management in Kolkata.

Shares of Tata Motors closed 2.8% higher yesterday before the earnings were announced.

Carmakers have been on the frontline of economic pressures in the world's second-largest economy as growth slows, with sales falling in China for the first time in nearly three decades during 2018. "We continue to work closely with Chinese retailers to respond to current market conditions", he added.

On Friday, Tata Motors and Tata Motors DVR tanked over 20 per cent each and hit a low of Rs 129 levels and Rs 71, respectively on the National Stock Exchange (NSE).

Tata Motors wrote down its investment in Jaguar Land Rover by US$3.9 billion (S$5.3 billion) due to market challenges, especially in China, technology disruptions and rising debt costs.

The cost of the voluntary scheme will be recognized in the quarter ending March 31, the company said.

Tata Motors' loss came at Rs 26,993 crore ($3.78 billion) for the three months ended December 31, compared with a profit of Rs 1,199 crore in the year-ago period.

Last month JLR said it would cut about 10 percent of its 42,500-person workforce, mostly in its home market. Despite the muted growth, Tata Motors has delivered strong results, registered an impressive profitable growth this year on the back of exciting products, renewed brand positioning and aggressive cost reduction.

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