India's Tata Motors unveiled a large and unexpected fall in fourth-quarter earnings as the owner of Jaguar Land Rover suffered from the effects of a slowdown in the crucial Chinese market.
The Mumbai-based group said there would be no full-year dividend for the first time since 2002 as the domestic cars and trucks unit, which has long been propped up by the more successful British stable, swung to a net loss.
“The results are quite bad – a lot worse than we thought they’d print,” said Robin Zhu, an analyst at Bernstein Research.
Once dominant in India, Tata Motors has suffered sharp falls in market share. Amid criticism of out-of-date cars and a prolonged slowdown in the domestic commercial vehicle market, it has been reliant on the highly profitable JLR, which it bought from Ford in 2008 for £1.3 billion.
But JLR is starting to suffer the effects of a slowdown in China, the world's biggest passenger car market and the driving force behind global automakers' profitability since 2010.
Premium and luxury carmakers are being affected by an official crackdown on ostentation. Industry insiders also say some Chinese consumers are putting off purchases because they think prices will come down following scrutiny of carmakers by China’s National Development and Reform Commission.
But more immediately, prices are falling in China as global carmakers react to a shift in consumer tastes towards cheap and cheerful sport utility vehicles made by domestic brands.
Tata Motors said net profit fell 56 per cent in the fourth quarter to 17.2 billion Indian rupees (€247 million), despite revenues increasing 3.5 per cent to 676 billion Indian rupees in the three months to the end of March. Jaguar Land Rover sales also increased about 9 per cent to €8.2 billion in the period, but net income fell by a third to €427 million.
Copyright The Financial Times Limited 2015