Tata Motors' arm Jaguar Land Rover may look to clear US inventory fast

Analysts feel company will focus on profitable growth besides volume growth JLR likely to have 1-2 months' inventory in US which will now liquidate faster

Tata Motors’ luxury arm Jaguar Land Rover, which is pausing its shipments to the US, is likely to liquidate the current inventory in the US market sooner than expected, analysts felt.

 

JLR is estimated to have one to two months’ inventory in the US, said one Mumbai-based analyst on grounds of anonymity. Another analyst who watches the sector closely said that with the carmaker pausing exports, the current inventory will liquidate faster. It takes at least two to three weeks for shipments to reach from the UK and other parts of Europe to the US.

 

On Saturday, a JLR spokesperson said: “The USA is an important market for JLR’s luxury brands. As we work to address the new trading terms with our business partners, we are enacting our planned short-term actions including a shipment pause in April, as we develop our mid- to longer-term plans.”

 

The company had said earlier on April 2 that its luxury brands have “global appeal” and its business is “resilient”, accustomed to changing market conditions.

 

“Our priorities are now delivering for our clients around the world and addressing these new US trading terms,” JLR had said.

 

JLR sold around 430,000 vehicles across the world for the year ending March 2024. The company earned 23 per cent of its revenue and 26 per cent of its wholesale volumes from the US in FY24. That share further rose to 33 per cent in the nine months ended December 31, 2024.

 

JLR primarily ships vehicles to the US from UK plants (Solihull, Wolverhampton) and also from a plant in Slovakia. Automobiles have a flat tariff of 25 per cent, and hence the location of production is not going to impact prices. JLR also plans to have a plant in India in the medium term.

 

Mrunmayee Joglekar, auto and FMCG research analyst at Asit C Mehta Investment Intermediates, had said a few days ago: “With no manufacturing facility in the US, all JLR vehicles will be subject to tariffs, which could impact pricing and profitability.”

 

Moody’s noted in a recent report: “Customers of JLR, which makes luxury cars, tend to be less price-sensitive compared to buyers of mass-market cars. But passing on the entire tariff increase may be difficult. A decline in demand from the US, which accounts for nearly a third of JLR’s sales, would be credit negative.”

 

Key brands in the premium luxury segment like Range Rover, Range Rover Sport and Defender have shown price resilience.

 

“The Defender, for instance, was earlier priced at an average of GBP 45,000, which has now increased to GBP 60,000. Further, the recent differentiated offering in the model, Defender Octa, is priced at almost GBP 200,000 and is expected to be the biggest blockbuster launch in the Middle East. Customers in this price segment are willing to pay a significant premium for unique products that stand out as differentiated,” Motilal Oswal analysts said in a March report.

 

Analysts felt that these three brands have been successfully positioned as aspirational for customers, and the company is working to position the Discovery brand in a similar manner. JLR will focus on volume growth, but in a profitable manner, analysts noted.

 

Richard Molyneux, chief financial officer of JLR, stated during the recent third-quarter analyst call that the company foresees a market that is both challenging and unpredictable. “Tariffs and a progressive breakdown of global free trade are a concern, as is the disconnect between consumer demand for BEVs and government emission regulations. We’re not standing still on any of these,” he had said.

 

JLR brands like Range Rover and Defender “resonate strongly” with US consumers, he added.

 

The US tariffs come at a time when JLR is facing challenges in China. “China continues to remain under stress. However, JLR remains the least impacted with a decline of just 3 per cent compared to the industry’s decline of over 20 per cent. Its inventory in China is also well under control,” Motilal Oswal analysts said.