Summary
- JLR betting on cost cuts, new EVs and North America expansion
- Q2 adjusted core margin 1.1%, free cash outflow £540 million
- Cuts FY adjusted core margin forecast to 2-3% from about 4%
(Reuters) – British luxury carmaker Jaguar Land Rover (JLR) is targeting double-digit growth in core earnings in fiscal 2028, banking on a £1.7-billion ($2.3 billion) cost-cutting drive, new electric models and expansion in North America to boost profitability.
The two-year restructuring programme will target manufacturing, materials, logistics and warranty costs, as the automaker seeks to lower cash break-even volumes to about 300,000 vehicles.
JLR, part of India’s Tata Motors, expects revenue of about £25 billion in fiscal 2027, but cut its adjusted core earnings margin forecast to between 2% and 3% from about 4% and expects free cash outflow of around £1.25 billion.
It blamed market challenges and exceptional costs, including a one-off charge of £530 million, for the lower margin outlook.
The automaker reported an adjusted core margin of 1.1% and free cash outflow of £540 million in its second quarter from July to September.
JLR said it expected further growth in North America, where wholesales rose 20% year-on-year in the first half of fiscal 2027. Its plans include strengthening its product lineup and improving supply and quality.
“Together with our growth plans for the US and disciplined execution of our enterprise missions to reduce our break-even to 300,000 units, position us well to deliver consistent cash-accretive growth in the coming years,” JLR Chief Executive PB Balaji said on a post-earnings call.
China, however, has been a weak spot for JLR. Its Chinese volumes fell sharply in the quarter, and the company said the market there was down almost 30%. Despite that, Balaji said JLR would keep investing in the country and was also taking steps to protect its intellectual property — referring to its case against China’s biggest automaker, BYD.
RESTRUCTURING COSTS
JLR continues to deal with the impact of a cyberattack last year, while restructuring costs and investment in new models weigh on cash flow.
“Out of the £530 million of exceptional charges, £295 million relates to a voluntary redundancy programme that relates to about 4,000 people,” said JLR finance chief Richard Molyneux.
The restructuring costs also weighed on the quarterly results of Tata Motors’ passenger vehicles unit.
The Indian group’s domestic passenger vehicle business reported a 4% core earnings margin, down 180 basis points from a year earlier, despite a 51% rise in revenue. Higher commodity costs and adverse foreign exchange movements hurt margins, while the company flagged geopolitical uncertainty and commodity price volatility as ongoing risks.
Consolidated revenue rose to 969.20 billion rupees ($10.30 billion) from 723.49 billion rupees a year earlier.
The maker of the Punch and Nexon said it would consider another vehicle price increase in the fourth quarter to offset rising input costs.
($1 = 94.1475 Indian rupees)
($1 = 0.7560 pounds)
Reporting by Saikeerthi and Chandini Monnappa in Bengaluru. Editing by Harikrishnan Nair and Mark Potter
