The troubles for Jaguar Land Rover are only set to intensify

China is a key market for Tata Motors' UK-unit Jaguar Land Rover. During the September quarter, China sales accounted for 31 percent of the overall JLR segment, including the China JV.

However, the country is currently plagued with record Covid cases and the protests against the government's  Zero Covid policy and the related restrictions that are increasing by the day. As of November 27, the country had reported close to 40,000 daily new cases.

People in Shanghai and Beijing demonstrated against the stringent Covid-19 measures, causing the police to stop and search protestors at the sites.

The Chinese market accounted for 27 percent of overall JLR sales in financial year 2022. JLR sales from China had just crossed a multi-quarter high during the September period before the recent Covid outbreak and the subsequent protests.

The struggles for JLR are also forthcoming as the Guardian reported earlier this week that the luxury car-maker is cutting production at its UK factories until the spring as it struggles to source semiconductors.

In response to the report, JLR said that the company continues to actively manage operational patterns of their manufacturing plants and that the industry is experiencing semiconductor supply disruptions. However, it expressed optimism over its performance to improve during the second half of the current financial year due to strong demand.

JLR has also been in the news last week after UK's chancellor said that electric vehicles will not be eligible for excise duty exemptions from 2025 and that car owners must pay their taxes from that year. 20 percent of JLR's volumes come from the UK and were the lowest since the June quarter of financial year 2021 during the most recent period.

Last week, JLR's CEO Thierry Bollore resigned with effect from December 31, at a time when the unit is going through financial difficulties. JLR had lowered its full year guidance during the September quarter and it also reported negative free cash flow of GBP 15 million due to adverse working capital movement. At 10.3 percent, JLR's EBIT margin declined 230 basis points from the June quarter.

Jefferies cut Tata Motors' EPS estimates for financial year 2024-25 by 3-9 percent factoring in lower estimates for JLR. However, the brokerage believes that despite the unit facing macro headwinds, it is in a good product cycle.

Shares of Tata Motors are off the day's low, trading 0.25 percent higher at Rs 434.35.