Recovering from coronavirus will be a tough task for Tata Motors and Jaguar Land Rover

• Moody’s is reviewing Tata Motors for a possible downgrade.
• The demand for new vehicles will reduce meaningfully over the coming months, especially in the European, Middle East, African and North American markets.
• With the shutdown of plants in China, Tata Motors luxury subsidiary Jaguar Land Rover’s sales fell by 85% in February.

The global ratings agency Moody’s is reviewing Tata Motors for a possible downgrade. After a troublesome year with the auto slowdown, car manufacturers had hoped for a better start to the next financial year but the spread of the novel coronavirus has turned things worse..

Moody’s said, “ weaknesses in Tata Motors’ credit profile, including its exposure to final consumer demand for automobiles, have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions, and the company remains vulnerable to the outbreak continuing to spread.” The ratings agency further said that demand for new vehicles will reduce meaningfully over the coming months, especially in the European, Middle East, African and North American markets.

And the falling sales have also reflected in its falling share price in the market. For the first time in 11 years, Tata Motors share price is in double digits.

China is a major market Jaguar Land Rover, which makes for nearly 3 out of every four rupees in revenue made by parent Tata Motors. With the shutdown of plants in China, JLR’s sales fell by 85% in February.

Tata Motors has already been pretty badly hit with slowing sales owing to the consumption slowdown in India. With the BSVI vehicles⁠— those that comply with the latest emission norms⁠— coming into the market from April, consumers had also been wary of buying older models and now, the unsold inventory of BSIV vehicles will be rendered useless after April 1, when the new law sets in.

“Having almost completed our planned production and despatches of BS IV, we will start moving to BS VI production and despatches from January and step up our volumes in the coming months,” Mayank Pareek, president of passenger vehicles business unit, Tata Motors had said in December.

The company also planned a slew of launches this year – not just BSVI models but also electric vehicles – and was hopeful that will ring in sales.

But it could all come to a halt now because of the coronavirus spread. Production facilities have come to a halt as countries around the world are shutting down to control the spread of the virus.

“Even without production for a couple of months, there will be an overhang of inventory which could lead to considerable manufacturer incentives before the new model year shipments,” said the report by Moody’s.

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