Despite a strong performance in the first quarter of 2021, Tata Motors on Tuesday announced a Rs 7,600 crore ($1 billion) loss as the restructuring cost of the British brand Jaguar Land Rover (JLR) hit the Indian automakers' profits.
In the January-March quarter, Tata posted a net loss of Rs 7,600 crore which is significantly less than Rs 9,890 crore loss of last year.
Interestingly, an evaluation done by analysts predicted a profit of about 2,662 crores ($365.4 million) in Q1 2021. However, Tata Motors' loss was largely on account of 'exceptional items' - asset write-downs and restructuring costs.
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As the pandemic soared and hammered international and domestic markets, Tata reported a loss for a third consecutive year. However, easing of the virus and rigorous economic activity from October to March helped the automobile sector regain its strength.
The auto giant's revenues jumped 42 per cent, but exceptional costs worth $2.13 billion (Rs 15,559 crore), related to its restructuring of JLR hurt its profitability. "It was a strong and resilient all-round performance for us, despite the pandemic," P.B. Balaji, the chief financial officer of Tata Motors, told reporters in a post-earnings conference call.
But the situation is unlikely to remain favourable for most Indian auto giants in the months ahead. Besides supply chain disruptions and semiconductor shortages flagged by Tata Motors, the impact of the intense second wave of Covid-19 that hit India in April could begin impacting corporate earnings.
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Tata Motors' share price has surged 78 per cent in 2021 so far, boosted by expectations of a sustained recovery in profitability. Its shares closed over three per cent higher in Mumbai Tuesday ahead of the earnings announcement. Britain's largest car manufacturer JLR reported a 20.5 per cent increase in revenue, led by a strong sales performance in China.
The global motor industry was already reeling from the sharp downturn in sales caused by the pandemic and the challenges of switching to electric-powered vehicles. In February, Jaguar Land Rover announced that its Jaguar brand would be all-electric by 2025 and that it will launch electric models of its entire Jaguar and Land Rover line-up by 2030.
