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Jaguar Land Rover announces “adjustment” to production schedules, hints at job losses

Tata Motors Limited (TML) owned luxury car maker Jaguar Land Rover (JLR) announced that it would make “adjustment” to its production schedule. The decision was taken to tide over effects of continuing headwinds impacting the car industry. The company will be announcing its FY19 production plans on Monday April 16, 2018.

Media sources reported that this could put about 1,000 contract (temporary) jobs in danger. The company will, however, continue to hire engineers, graduates and apprentices for investing in new products and technologies. Also, its commitment to the UK plant will continue. JLR has invested more than £4bn since CY2010 to future proof manufacturing technologies to deliver new models from that plant.

The recent decision comes in the wake of factors such as slowing diesel sales (down 37% yoy in March 2018). JLR has significant exposure to diesel as 90% of its UK sales are diesel vehicles. As per industry experts, JLR has been slower than rivals to embrace hybrid and electric vehicles. Brexit also poses another threat to luxury car makers in UK as it is unclear how trade relations between UK and EU will pan out post the event.

We expect JLR volumes to improve due to three new launches over next 12-18 months (Velar, E-Pace, I-Pace, RR/RRS refresh). JLR’s prolonged volume recovery remains a key concern. However, margin improvement in JLR led by cost savings (post commencement of Slovakia plant) and expiry of major portion of unfavorable hedges, would drive overall profitability. At a consolidated level, it derives ~80% of its revenue (Q3FY18) from wholly owned subsidiary, JLR.

Tata Motors Ltd ended at Rs356.65 down by Rs1.4 or 0.39% from its previous closing of Rs358.05 on the BSE.

The scrip opened at Rs359 and touched a high and low of Rs360.60 and Rs354.45 respectively. A total of 61,94,889 (NSE+BSE) shares were traded on the counter. The current market cap of the company is Rs1,13,289.72cr.