Daijiworld Media Network - Mumbai

Mumbai, Aug 14: Tata Motors Passenger Vehicles (TMPV) is facing near-term margin pressure despite a strong demand outlook for its India business, with weakness at Jaguar Land Rover (JLR) and higher input costs weighing on its June quarter performance.

TMPV's consolidated revenue for the first quarter of FY27 rose 9.3% year-on-year to around Rs 95,799 crore. However, consolidated EBITDA margin declined 120 basis points to 7.4%, highlighting the pressure on profitability.

The decline in profitability was sharper at the bottom line. Consolidated net profit fell about 80% year-on-year to Rs 775 crore from Rs 3,924 crore a year earlier. The performance was affected by lower JLR volumes, supply-chain disruptions, higher commodity costs and other operational challenges.

JLR, which contributes roughly 80% of TMPV's consolidated revenue, remained a major drag on the quarter. Its performance was affected by supply disruptions, weaker demand in some markets and higher costs. JLR's operating margin fell to 2.8% in the quarter from 4% a year earlier, according to the Financial Times.

The domestic passenger vehicle business, meanwhile, continued to show strong momentum. India PV volumes grew 48% year-on-year, supported by demand for new models and electric vehicles. The strong domestic performance helped offset some of the weakness at JLR.

However, domestic margins also came under pressure. Analysts attributed the weakness partly to commodity cost inflation, while promotional and sponsorship expenses also weighed on profitability.

The broader India passenger vehicle market is expected to remain supportive for TMPV, with the company benefiting from its SUV portfolio, new launches and growing electric vehicle sales. Earlier analyst estimates had projected continued volume growth for the domestic business, although rising input costs were expected to limit margin expansion.

JLR's recovery remains the bigger uncertainty for the consolidated business. The luxury automaker is dealing with weaker volumes, supply constraints and market-specific challenges while pursuing a major cost-reduction programme. Tata Motors has reaffirmed a target of £1.7 billion in JLR cost savings over the next two years.

The company has also maintained its investment plans despite the near-term challenges. TMPV plans to invest around Rs 33,000-35,000 crore in passenger and electric vehicles between FY26 and FY30, reflecting its continued focus on expanding the India business and strengthening its EV portfolio.

The weak quarterly performance has nevertheless affected investor sentiment. TMPV shares fell as much as 6% on Friday, making the stock one of the biggest losers on the Nifty 50 and Nifty Auto indices. Analysts have raised concerns about persistent margin pressure and the pace of JLR's recovery.

Thus, while India's passenger vehicle demand provides a positive foundation for TMPV, sustained commodity inflation and JLR's profitability challenges could continue to offset the benefits of strong domestic growth in the near term.