Tata Motors Falls 5% After JLR Lowers FY26 Margin Outlook

On Monday, the Tata Motors shares declined by 5.49 percent, touching a day’s low price of Rs. 672.95 from its previous closing price of Rs. 712.05. The Tata Motors shares are under pressure following Jaguar Land Rover's (JLR) cautious guidance for FY26. Despite Tata Motors' recent best quarterly results and with JLR's turnaround, the investor sentiment has remained lukewarm due to uncertainty in JLR’s key markets and the evolving competitive landscape.

JLR, which accounts for nearly two-thirds of Tata Motors' revenue, is facing challenges in markets like the US and China, which are its two most important overseas markets. Recent US tariffs have created uncertainty for automakers exporting to America. In April, the US imposed a 25 percent tariff on imported vehicles, which has prompted JLR to temporarily halt shipments to the US.  There are expectations that the US-UK trade deal can make the US reduce tariffs on UK-built vehicles to 10 percent. There are some restrictions on units in sales to the US. So, this cap can act as a barrier for JLR’s potential growth in the US while introducing new operational complexities.

This tariff environment has forced JLR to look at its profitability targets. JLR cut its EBIT margins and expects to be in the range of 5 percent to 7 percent for FY26 from 10 percent earlier, which is lower than the 8.5 percent reported in FY25. The company is looking into the developments and will provide further updates during its upcoming investor day. Recently, some analysts like JP Morgan have covered it by downgrading Tata Motors, citing the likelihood of a tough year ahead for JLR due to these tariffs, as well as broader macroeconomic uncertainties.

In the China region, JLR faces a different set of challenges. The Chinese premium automotive market is experiencing intense competition, especially from rapidly growing domestic brands such as BYD, Xiaomi, and others, which are making inroads with tech-advanced and competitively priced electric vehicles. This effect has an impact on the company, as its market share is at risk. In response, JLR recently said that it plans to cease production of its own vehicles in China by September for Jaguar and by the end of 2025 for Land Rover Discovery and Range Rover Evoque. JLR plans to keep the Freelander brand as a China-only venture, which is in collaboration with Chery. This strategic decision underscores the difficulties JLR faces in competing head-to-head with cost-efficient Chinese brands.

The competitive intensity is not limited to China. Globally, established players like JLR are contending with rising customer acquisition costs and the need to invest heavily in new technologies, especially electric vehicles, which is required to keep pace with both regulatory demands and consumer preferences. In India, Tata Motors is also grappling with a slowdown in the passenger vehicle segment.

Brokerage companies have reacted to these developments by revising their outlooks. Jefferies has provided a target price of Rs. 630 and expects EBITDA for FY26 and FY27 to be around 8 percent, while raising 6 to 7 percent for earnings per share (EPS) for the same period, while citing the combined impact of tariffs, competition, and higher costs. Kotak Institutional Equities has downgraded the stock to “sell” for a target price of Rs. 600. Citi has suspended its rating, highlighted near-term headwinds in both the passenger and electric vehicle segments, while mentioning management being positive on the India commercial vehicle business.