JLR set to gain in volume

Tata Motors-owned Jaguar Land Rover (JLR) will be one of the beneficiaries among the global luxury carmakers of the proposed duty cut on imported cars in China.

Like its German rivals BMW and Mercedes, JLR counts China as one of its most important markets, both in terms of volume as well as profitability.

According to estimates by analysts, the region accounts for 26 per cent approximately at the Ebitda (earnings before interest, tax, depreciation and amortisation) level in the company’s earnings. Its contribution in volume terms in total sales in 28 per cent. In April, JLR retailed 45,180 units of which China accounted for 12,970, up 29 per cent over the year-ago period.

A spokesperson at Tata Motors declined to comment ahead of the company’s earnings report on Wednesday. An email sent to JLR’s spokesperson remained unanswered.

“If the import duty is cut, it will be a big positive for JLR operations in China,” said Bharat Gianani, an analyst at Sharekhan. Six of every 10 models that JLR sells in China are made locally and the rest are imported from the UK.

Another company that will gain from the duty cut is Motherson Sumi, which counts Audi and Mercedes as its key customers. The reduction in tax will make models more affordable, he said. The level of impact will be governed by the extent to which the firms pass on the benefits to the buyers, he said.

The move to pare duty has come at a time when JLR has been facing strong headwinds in Europe, owing to increased taxation on diesel cars.

In the past one year, Tata Motors’ stock has dropped 31.6 per cent, underperforming on the Sensex as well as the auto index. Snapping a declining streak, the stock closed at ~307.70, up 4 per cent on Tuesday.