Tata Motors' JLR Bet Holds Firm, Demand Remains Key Concern: Here's What Analysts Say

Tata Motors shares: For the auto giant, demand continues to remain on a turbulent path, especially in the domestic region. However, Tata Motors is witnessing a positive trend in international markets, with strong demand levels in the US. Easing norms around emissions is also making the outlook favourable for Tata Motors in the EU region. As for China, the cyclical slowdown has weighed down the company's bottom-line.

Besides the demand picture, higher operational cost is also adding pressure on the company's bottom line. Warranty costs have surged sharply as new models rely heavily on software like touchscreen controls and other advanced features. When these software-related issues arise, fixing them requires highly skilled technicians, which increases the overall warranty costs. Even as demand levels improve in the US, high labour cost in the nation is adversely affecting the auto giant.

What is working well for Tata Motors is its premium bet, JLR. The company is focusing on transitioning JLR into a luxury brand by offering exclusivity and high-quality. The top 3 models (Range Rover, Range Rover Sport and Defender) are outperforming peers across regions.

"JLR continues to focus on its strategy of building on the ‘House of Brands’ and expects mix-led benefits to continue. JLR is confident of meeting its FY25 EBIT margin guidance of ≥8.5% and turning net debt-free. With Jaguar ICE to be phased out, we expect positive impact on margin. Warranty cost may ebb from Q4," Elara Capital said in a report.

EVs Fall Short

The pace of EV growth is also slowing down. As per a report by Motilal Oswal, given the uncertainty around the pace of EV adoption in key markets, the company may need to extend the life of its ICE platforms beyond the originally planned timeline. It may also consider launching new ICE variants in the future.

The brokerage house has maintained a neutral stance with the target price at Rs 705. Trump's tariff risk is another concerning factor for Tata Motors, as looming uncertainty is weighing down investor confidence.

"JLR’s performance has been resilient with volumes and margins holding well despite tough market conditions. The Street is currently concerned about tariff risks though. A trade deal between the UK and the US will be positive for the stock," Nomura mentioned while maintaining a BUY rating on the stock with a target price of Rs 861.