Mumbai: Jaguar Land Rover (JLR), owned by Tata Motors Passenger Vehicles, has lowered its revenue and profitability outlook for FY27, citing geopolitical uncertainty, challenging market conditions and higher restructuring costs. The British luxury carmaker is now targeting an adjusted earnings before interest and tax (EBIT) margin of 2-3%, compared with its earlier projection of around 4%.

Despite the weaker near-term outlook, JLR is banking on a £1.7-billion cost-reduction programme, new model launches and expansion in North America to deliver double-digit growth in core earnings in FY28.

The company has revised its FY27 revenue expectation to approximately £25 billion from its earlier estimate of £26 billion. It also expects free cash outflow of around £1.25 billion during the financial year.

“In light of ongoing market challenges, geopolitical risks and the exceptional costs recognised in the quarter, guidance for the full year has been revised to an adjusted EBIT margin in the range of 2-3% and free cash outflow of around £1.25 billion,” the company said.

The revised projections reflect the pressure on JLR as it deals with restructuring expenses, investments in upcoming vehicles and the continuing effects of last year’s cyberattack.

JLR’s second-quarter performance under pressure

JLR reported an adjusted EBIT margin of 1.1% during the July-September quarter. Its free cash outflow stood at £540 million, while exceptional charges amounted to £530 million.

The exceptional expenses were mainly associated with restructuring, employee exits and impairment of intangible assets under development.

Chief Financial Officer Richard Molyneux said £295 million of the charges related to a voluntary redundancy programme covering approximately 4,000 employees.

The restructuring expenses also affected the quarterly financial performance of Tata Motors Passenger Vehicles.

The company reported a consolidated loss attributable to shareholders of Rs 5,531 crore for the quarter. This followed exceptional items totalling Rs 6,738 crore, including employee separation costs of Rs 3,776 crore and asset impairment charges of Rs 2,856 crore.

JLR accounted for £530 million of the exceptional expenses recognised during the period.

The charges reflect the financial impact of JLR’s efforts to reshape its workforce and business operations as it attempts to improve efficiency and lower costs.

JLR expects to improve cash flow in second half of FY27

Despite the expected full-year cash outflow, JLR indicated that it was aiming to achieve marginally positive cash flow in the second half of FY27.

Molyneux said the company’s cash guidance accounted for the risks and opportunities visible at present. He also cautioned that conditions in the automotive market could change quickly, particularly as the company prepares to launch new models.

“Our cash guidance implies that we intend to be marginally cash positive in H2. We have included everything that we know in the outlook. We do know that this market is extremely fast-moving, both in terms of opportunities and in terms of risks related to our launches,” he said.

The company’s ability to improve cash generation will be important as it continues to fund product development, restructuring and other strategic investments.

The revised outlook also indicates that JLR expects the pressure on profitability to continue through the financial year, even as it works towards improving its operating performance.

£1.7-billion cost-cutting programme

JLR’s longer-term strategy centres on a two-year restructuring programme designed to improve operational efficiency and reduce expenses across the business.

The company expects to generate savings of approximately £1.7 billion through measures covering manufacturing, materials, logistics and warranty costs.

One of the programme’s main objectives is to reduce JLR’s cash break-even production volume to around 300,000 vehicles.

A lower break-even level would allow the company to operate with greater flexibility during periods of weaker demand. It could also reduce the number of vehicles JLR needs to produce and sell to cover its cash operating costs.

The savings programme is expected to support profitability and cash generation as the company introduces new models and pursues growth in important markets.

Tata Motors Passenger Vehicles Chief Executive PB Balaji said the company’s North American expansion plans, combined with efforts to lower its break-even volume, would help strengthen its financial position.

“Together with our growth plans for the US and disciplined execution of our enterprise missions to reduce our break-even to 300,000 units, position us well to deliver consistent cash-accretive growth in the coming years,” Balaji said.

North America growth offsets weakness in China

North America has emerged as an important market for JLR as it looks to balance uneven demand across regions.

The company recorded a 20% year-on-year increase in wholesale volumes in North America during the first half of FY27. It expects the region to remain an important contributor to growth, supported by a stronger product portfolio and improvements in supply and quality.

The performance offers some support to JLR as it faces weaker demand in China.

The company reported a sharp decline in volumes in the Chinese market during the September quarter. It also said the broader Chinese market had contracted by nearly 30%.

China remains a challenging environment for international luxury carmakers, with JLR facing pressure on volumes as it competes in a market undergoing significant changes.

Balaji indicated that the company would continue investing in China despite the difficult conditions. At the same time, JLR is taking steps to protect its intellectual property.

The company is also pursuing legal action involving BYD, China’s largest automaker. The dispute adds another dimension to JLR’s efforts to protect its technology and business interests in the market.

Tata Motors’ domestic passenger vehicle business faces margin pressure

The financial pressure is not limited to JLR. Tata Motors’ domestic passenger vehicle operations also reported weaker profitability margins despite registering strong revenue growth.

The domestic business recorded a core earnings margin of 4%, down 180 basis points from the corresponding period a year earlier.

Revenue, however, increased by 51%, reflecting higher business volumes and sales performance. The improvement in revenue was offset by rising commodity costs and unfavourable foreign exchange movements.

At the consolidated level, Tata Motors Passenger Vehicles reported revenue of Rs 96,920 crore, compared with Rs 72,349 crore in the year-ago quarter.

The company also identified geopolitical uncertainty and fluctuations in commodity prices as continuing risks to its operating performance.

It indicated that another vehicle price increase could be considered in the fourth quarter to help offset rising input costs.

FY28 growth target depends on execution

For JLR, the immediate priority is to restore margins, improve cash generation and manage restructuring expenses while navigating uneven demand across major markets.

The company’s FY28 ambitions are built around the expectation that its £1.7-billion savings programme will translate into lower operating costs. New model launches and North American expansion are also expected to support growth and compensate for weakness in China and other markets.

However, achieving double-digit growth in core earnings will depend on the pace of the restructuring, the success of upcoming vehicle launches and the company’s ability to manage production and costs.

The revised FY27 guidance highlights the challenges facing JLR in the near term. Its FY28 target, meanwhile, reflects the company’s confidence that operational changes and a stronger product pipeline can create a more sustainable path to profitability.