One of the biggest names in automobile manufacturing in India and the owners of Jaguar Land Rover, Tata Motors Limited shocked the markets today as they announced the biggest quarterly loss in the history of Indian corporations. In an unprecedented development, Tata Motors, one of India’s biggest companies, recorded a quarterly loss of an astonishing $3.8 billion. The primary reason for this disaster is the slowdown in China and a rapid slump in sales in the country. Needless to say, the effects of the disaster were felt in the stock market, as the Tata Motors stock plummeted by around 30% following the announcement. It is interesting to note that analysts had expected the company to record a profit in the quarter.
In this regard, it is necessary to point out that a large part of the current problems at Tata Motors is down due to the slowdown in sales of Jaguar Land Rover in China. The sales of the JLR make up the biggest chunk of the company’s revenues, and in the previous quarter, the performances have been abysmal. Earlier, Tata Motors had estimated that the JLR unit would break even in the first quarter of 2019, but now they have revised their forecast and have stated that the unit will show an operating loss in the first quarter.
The slowdown in the Chinese economy has hurt plenty of companies all across the world, but in the case of Tata Motors, it has been particularly damaging. The sales of the JLR in China shrunk by almost 50% in the last quarter of 2018 owing to reduced demand in the country. China is the world’s biggest market for automobiles and shrinkage of demand in that country for the first time in more than two decades is bound to have a big impact. Last but not least, the uncertainty in relation to Brexit and the clampdown on diesel-run cars in Europe has also hit Tata Motors hard.
It will take a lot to turn the numbers around. However, the representatives of the company did outline a bit of their plans to turn it around. P.B. Balaji, the Chief Financial Officer at Tata Motors, said, “We are now taking clear and decisive actions in JLR to step up its competitiveness, reduce costs and improve cash flows and make the business fit for the future.”