Weak JLR guidance, domestic sales worries weigh on Tata Motors stock

Motilal Oswal Research has maintained its "neutral" rating on the stock. The brokerage has reduced its FY26 EBIT margin assumption for JLR to 6 per cent from 6.9 per cent earlier

Tata Motors’ stock has declined 8.4 per cent over the past four trading sessions, weighed down by multiple demand-related headwinds impacting its UK subsidiary, Jaguar Land Rover (JLR).

 

In response to these challenges, the company has revised its FY26 margin guidance downward, prompting several brokerages to downgrade the stock.

 

JLR has lowered its FY26 earnings before interest and taxes or Ebit margin guidance from 10 per cent to a range of 5–7 per cent.

This revision reflects a mix of macro and industry-specific pressures, including the evolving US tariff regime, the ongoing transition to electric vehicles, and a sluggish demand outlook in China.

 

The company has also flagged risks stemming from forex losses linked to a weakening US dollar, as well as higher capital outlays necessitated by region-specific product requirements.

 

JLR’s financial outlook has also dimmed on the free cash flow (FCF) front.

 

After generating 2.3 billion pounds in FY24 and 1.5 billion pounds in FY25, the company now expects FCF to be near zero in FY26.

 

The recovery is anticipated in FY27 and FY28, supported by a ramp-up in new model volumes. 

  JLR has reaffirmed its capital investment plan of £18 billion over FY24–28, including 3.5 billion pounds in FY26, to be funded through internal cash flows. As of FY25-end, JLR’s net cash stood at 278 million pounds.

 

The US market, which comprised 30 per cent of JLR’s FY25 sales, presents a significant challenge due to the current 27.5 per cent import tariff.

 

While a prospective trade deal could lower this to 10 per cent, the near-term impact remains negative. Additional concerns include elevated dealer inventories and a temporary pause in Jaguar model sales, both of which could suppress FY26 wholesale volumes.

 

Analysts Joseph George and Ankit Ruparel of IIFL Research forecast a 6 per cent volume decline for JLR in FY26.

 

Combined with margin compression, this could drive a 25–30 per cent earnings drop. The brokerage expects Q1FY26 to be particularly weak, citing low volumes, compressed margins, and negative FCF. 

 

 

However, the anticipated early 2026 launch of the Range Rover electric vehicle could serve as the next meaningful catalyst. IIFL has retained its “add” rating with a target price of ₹705.

 

Other brokerages share a cautious stance. JM Financial has downgraded the stock to “hold,” also with a revised target price of ₹705.

 

Analysts led by Saksham Kaushal note that while the company has executed well on internal levers like cost optimisation and operational efficiency, external factors such as tariff uncertainty, FX volatility (despite hedging), and demand softness in China have necessitated the guidance cut.

 

Motilal Oswal Research remains “neutral” on the stock.

 

The brokerage has lowered its FY26 Ebit margin estimate for JLR from 6.9 to 6 per cent, leading to a 10 per cent cut in FY26 earnings projections.

 

Analyst Aniket Mhatre said the need for consistent execution amid a weak demand environment and rising cost pressures, particularly for Tata Motors' domestic commercial (CV) and passenger vehicle (PV) businesses. 

The company has set ambitious targets for both segments, aiming for a 40 per cent share and double-digit margins in CVs and 18–20 per cent market share in PVs over the next three years.

 

While Tata Motors has delivered on internal execution, global macroeconomic pressures and strategic transitions at JLR have introduced significant short-term uncertainty, tempering investor sentiment.