Tata Motors shares fall over 5% after CLSA sees Jaguar Land Rover volumes decline by 14% in FY26

The sharp selloff in the stock came after CLSA, Asia's leading capital markets and investment group, said that the imposition of 25% US tariffs and the reduction in the number of model offerings for Jaguar Land Rover may lead to a drop in Jaguar Land Rover volumes by 14% in financial year 2025-26.

JLR’s earnings before interest and taxes (EBIT) margin is also expected to contract to 7% in FY26 and FY27, compared to 9% estimated for FY25. Furthermore, JLR’s EBITDA for FY26 has been revised down by 15%, although free cash flow (FCF) is expected to remain in positive territory, CLSA said in a note.

CLSA also adjusted the valuation multiple for JLR, lowering its enterprise value to EBITDA ratio (EV/EBITDA) from 2.5 times to 2 times. Interestingly, the market is currently pricing it at just 1.1 times, suggesting that much of the negative sentiment may already be factored into the stock, CLSA noted.

CLSA, however, mentioned that the commercial vehicle (CV) cycle is expected to bottom out by FY26. Valuations rolling forward to FY28 could potentially add ₹127 per share, offering some cushion against ongoing US demand risks due to tariffs.

Tata Motors shares have been facing selling pressure for quite some time. The stock has seen a correction of 47% from its peak of ₹1,179, which the stock touched on July 30, 2024. This steep decline has been attributed to multiple headwinds facing the company, both on the domestic and international fronts.

The stock’s downward journey started when Mahindra & Mahindra introduced a new range of electric vehicles (EVs), intensifying competition within the EV space, analysts said. Tata Motors, which had enjoyed a leading position in the EV market, now faces increasing challenges in maintaining its market share as consumers are presented with more choices and advanced alternatives.

Adding to the company’s woes was the announcement of new tariffs by the United States on imported automobiles. The tariffs have a direct impact on JLR, Tata Motors’ UK-based luxury vehicle arm, which has major exposure to the US market. Analysts believe that these developments could weigh heavily on JLR’s sales volumes and margins in the coming years.

As of 9:59 am, Tata Motors shares traded 4.70% lower at ₹623.30; the stock was the top loser in the 30-share SENSEX.