Tata Motors demerger: PV unit vulnerable as JLR dominance clouds growth

Tata Motors demerger:  As Tata Motors' Passenger Vehicle (PV) and Commercial Vehicle (CV) arms begin trading as separate entities after the demerger, analysts say the PV unit faces key challenges because of its heavy reliance on Jaguar Land Rover (JLR). While the split from the CV arm is expected to improve management focus, Tata Motors PV’s growth remains closely tied to JLR’s global performance.  On Wednesday, November 12, the stock fell over 1 per cent to hit an intraday low of ₹403 compared to pevious session's close of ₹407.6. At, 02:06 PM, the stock was trading at ₹403.15, down 1.1 per cent. In comparison, the NSE Nifty50 index was trading at 25,904.00, up by 209.05 levels or 0.81 per cent.

 

Heavy reliance on Jaguar Land Rover

In FY25, Jaguar Land Rover (JLR) accounted for around 87 per cent of TMPV’s combined revenue, generating ₹3.14 trillion, compared with just ₹48,445 crore from the domestic PV and electric vehicle (EV) business. This highlights the company’s heavy reliance on its luxury overseas arm for growth and profitability.

 

The profitability gap between the two businesses is also stark. JLR reported an Ebitda margin of 14.2 per cent in FY25, while the domestic PV business managed only 6.8 per cent. At the operating profit level, JLR maintained a steady Ebit margin of 8.5 per cent, compared with less than 1 per cent for the domestic business. Ebitda stands for earnings before interest, tax, depreciation and amortisation.

 

In FY25, JLR’s profit after tax (PAT) for FY25 stood at ₹19,010 crore, while the domestic PV unit earned just ₹714 crore, highlighting how JLR continues to drive the bulk of TMPV’s earnings. Despite a decline in JLR’s profitability of ₹27,101 crore in FY24, it remains the key earnings driver, whereas the domestic unit’s margins have stayed largely flat over the past three years.  ALSO READ | Tata Motors demerger complete: Here's how CV & PV arms stack up financially

Global risks weigh heavily

Analysts suggest the company’s fortunes are largely driven by the luxury car brand’s global sales. However, JLR, which operates mainly in premium markets such as China, North America, and Europe, has been facing multiple challenges. The brand is facing intense competition from Chinese carmakers like BYD, which has rapidly expanded its presence in the premium EV segment with aggressive pricing and frequent model launches.

 

Earlier this year, a cyberattack disrupted production and deliveries for a few weeks, while consumer demand in Western markets has slowed because of high interest rates and inflation.

 

Sunny Agrawal, head of research at SBI Securities, said TMPV’s performance is closely linked to JLR’s global fortunes. "The company's sales are spread across China, Europe, the US, MENA, and RoW, so any regional demand swings directly affect TMPV’s results,” he said.

 

China, in particular, has been challenging, with local competitors such as BYD and Xiaomi capturing market share through aggressive pricing and advanced technology. Tariffs also impact JLR, since it has no production facilities in North America, while fluctuations in GBP-USD, GBP-EUR, and GBP-CNY affect foreign exchange hedges, commodity costs, and foreign debt, he added.

 

Prashath Tapse, senior vice president for research at Mehta Equities, said the US market continues to show relative strength but is contingent on the evolving outlook for trade policies and tariffs under the Trump administration. Consequently, weak global demand and adverse currency trends have compressed JLR’s margins, which in turn weigh on Tata Motors’ PV profitability.

Outlook for Tata Motors 

On domestic growth prospects, Agrawal said, “The domestic PV and EV business forms only a small part of TMPV’s consolidated results and cannot offset the cyclical performance of JLR.

 

Likwise, Tapse expects these headwinds to persist in the near to medium term, continuing to influence the company’s valuation and stock performance.

 

Currently, TMPV generates only about one-fifth of JLR’s revenue and profits. "Although it is expanding rapidly, driven by strong domestic demand for models such as the Nexon, Punch, Harrier, and Tiago, its scale remains too small to fully counterbalance JLR’s cyclical performance in the short to medium term. JLR will continue to exert the dominant influence, while TMPV serves as a growing but only partial buffer against global volatility," he added.

 

Kranthi Bathini, equity strategist at WealthMills Securities, said JLR’s dependence is one reason the stock has lagged behind peers like Hyundai, Mahindra & Mahindra, or Maruti, despite the recent GST reduction. It continues to remain in a consolidation phase for now,” Bathini added.

 

However, he noted that the management has demonstrated resilience in the past. Post-demerger, there will be greater management focus on the passenger vehicle segment, which should help strengthen operations and address current challenges, he said.