JLR’s electrification drive hits Tata Motors’ financial milestone

The automaker’s ambitious electric vehicle (EV) plan, which includes investing GBP15 billion in electrification over the next five years, has boosted investor confidence.

JLR’s Halewood plant will be converted into a fully electric production facility with the launch of the Range Rover EV and Jaguar EV set for 2025.

However, analysts at Prabhudas Lilladher cautioned, “The investment could have a negative impact on the financials in the near term and increase break-even volumes for the company which it is trying to bring down.”

JLR’s electrification strategy has also delayed its financial targets. The target of achieving double-digit EBIT (EBIT is short for earnings before interest and taxes) margin has been pushed back to 2026, three quarters later than planned earlier. JLR’s Ebit margin stood at 4 per cent in the December quarter.

However, analysts at Nomura Financial Advisory & Securities (India) view the target as a positive indicator of profitability. “As JLR’s strategy is to focus on demand-pull (rather than demand-push), higher margins are possible with lower volumes in our view. However, we are concerned about the impact of market forces on margins once orders soften in FY25,” they said in a report dated April 20.

The company now expects to reach net cash positive position by FY25, a year later than originally planned. Achieving this target depends on successful production ramp-up and margin improvement.

In the nine months ended December, JLR’s net auto loans stood at around Rs 38,000 crore.

Analysts at Nomura highlighted the challenges of closely tracking JLR’s electrification performance and positioning Jaguar as a premium brand to avoid direct competition with Tesla.

“Establishing Jaguar as a premium brand will avoid competition with Tesla on cost and pricing. But for JLR to pull off this brand change, Jaguar will have to offer excellent performance and features apart from an attractive design,” said analysts at Nomura.