Global demand uncertainty to continue to weigh on Tata Motors: Moody's

Brexit an added worry for wholly-owned subsidiary JLR

An uncertain pace of recovery in the global auto market will continue to take a toll on Tata Motors and its wholly-owned subsidiary Jaguar Land Rover (JLR) Automotive for the next 12-18 months, said Moody’s Investor Service, in a release on Friday. The agency, however, is likely to retain its ratings on Tata Motors. 

“We do not expect global auto shipments to recover to pre-pandemic levels until the middle of the decade, while further lockdowns, the transition to electric vehicles, emission compliance requirements and — for JLR — Brexit pose further downside risks,” said Tobias Wagner, Moody’s vice-president and senior credit officer.

Moody’s concerns about the road ahead for the company comes even as a sequential recovery is under way. 

JLR’s retail sales for the September quarter significantly improved from the figure in the preceding quarter but continue to be impacted by Covid-19, the company had said in a statement earlier this month.  JLR’s total retail sales for the quarter were 113,569 vehicles, up over 50 per cent from 74,067 units in the previous quarter, while down 11.9 per cent from pre-Covid levels a year ago. 

JLR’s China sales were up 14.6 per cent in the previous quarter and 3.7 per cent year-on-year (YoY). September also saw sales rise by 28.5 per cent YoY in China. JLR has recalled around 85 per cent of its more than 20,000 workers furloughed in the UK. 

Tata Motors’ underlying credit profile, Moody’s said, has deteriorated to a level weaker than JLR’s, but the ratings remain the same. Around Rs 8 out of the Rs 10 earned by Tata Motors as a consolidated entity is accounted for by JLR. 

Therefore, performance of the UK subsidiary heavily weighs on the parent’s stock. 

Taking a cue from the recovery in markets, the share price gained over 36 per cent between July and September.