Coronavirus outbreak has put a heavy impact on the sales and production of JLR. In the meantime, Tata Motors stays positive about the domestic business.
It is widely known that the world is now suffering a pandemic caused by Coronavirus. The highy harmful virus, which originated in China, has already crippled the world’s biggest manufacturing hub, thereby disrupting the supply chain of many car companies. Recently, Tata Motors shared its projection of a “limited volume loss” in the Indian market. In the meanwhile, its British subsidy, Jaguar Land Rover, would see a 1 per cent drop in gross revenue this year owning to sales slump and supply chain disruption in China induced by coronavirus outbreak.
The production and sales of JLR is severely affected by the coronavirus outbreak
According to JLR, the sales of this company have declined by 85% in February. It is estimated that the decline in sales in the Chinese market would cause JLR’s full-year EBIT margin to reduce by around 1 per cent. However, its plant in China has resumed manufacturing in the last week of February and it is said that the production will be recovered soon since employees are returning to work and the market is bouncing back. The company is still positive about the free cash flow in the fourth quarter. Last year, JLR sales in the Chinese market witnessed a 25 per cent year-on-year growth for half a year starting from July to December. The growing tendency extended towards the first three weeks of 2020, before the coronavirus broke out.
Besides China, other markets like South Korea, Japan and Italy are seeing a considerable slowdown as these countries are also heavily affected by the Coronavirus, which has caused sales of JLR to suffer in these market as well.
Tata Motors remains positive about its domestic business
In India, other than the concerns for the outbreak, Tata Motors has been expecting a significant impact in the first quarter of the year due to the implementation of the new BSVI emission norms. Additionally, given the recent production disruption, it is likely that production of at least some BSVI models will be impacted by a shortage of components. However, the homegrown carmaker still keeps a positive outlook towards the end of the year. Tata Motors also shared that the production of Jaquar is unlikely to suffer since most of the supply chain is based in the UK and Europe while the parts coming from China only account for a small per cent. At the moment, most of the Chinese tier 1 and tier 2 suppliers are reopening but working at a lower capacity.
In case of specific parts shortages, Tata Motor claims that JLR can still manage to build cars and retrofit these parts later on. But still, the company has said that they “cannot rule out the risk that a shortage of a critical component could impact production at some point.". Other car manufacturers in India Maruti, Hyundai, and Toyota recently confirmed that the production of their car models is not impacted by the Coronavirus.