CFO and incoming CEO PB Balaji says cost takeouts, lower duties, and strong order bank will offset Q1 hit.
08 Aug 2025 | 3688 Views | By Darshan Nakhwa, Shahkar Abidi, and Prerna Lidhoo
Tata Motors’ luxury arm Jaguar Land Rover (JLR) is holding its ground on profitability target despite a challenging first quarter hit by tariffs, new taxes, and a softening global demand environment. Group Chief Financial Officer P.B. Balaji, who will take over as JLR’s CEO in November, said the company remains ...
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Tata Motors’ luxury arm Jaguar Land Rover (JLR) is holding its ground on profitability target despite a challenging first quarter hit by tariffs, new taxes, and a softening global demand environment. Group Chief Financial Officer P.B. Balaji, who will take over as JLR’s CEO in November, said the company remains confident of delivering its FY26 EBIT margin guidance of 5-7% and near-neutral free cash flows, even after a full-quarter blow from U.S. trade duties and fresh levies in China.
“In the quarter, we got hit by almost 250 million pounds on tariff charges…a full impact of 27.5% that you see,” Balaji said during a media call on Friday, referring to the tariffs on UK- and EU-produced cars exported to the U.S. “Even though the deal was announced on May 8, it got ratified only on 30 June, and it is not with retrospective effect… That’s the reason why the EBIT also went down to 4% in JLR.”
JLR’s April-June quarter saw wholesale volumes fall 10.7% year-on-year to 87,286 units, while retail sales dropped 15.1% to 94,420 units. Revenue slipped 9.2% to £6.6 billion (₹75,952 crore), EBITDA margin contracted by 650 basis points to 9.3%, and EBIT margin fell 490 bps on year to 4%. Profit before tax, excluding exceptional items, came in at £351 million (₹4,067 crore), down £342 million from last year, with profit after tax at ₹3,566 crore versus ₹5,288 crore a year earlier. Free cash flow was negative £750 million, leaving a cash balance of £3.3 billion.
According to Balaji, the worst of the tariff impact should ease from the current quarter after the UK-US and EU-US trade agreements reduced duties to 10% and 15%, respectively. “The demand in the US market is also holding, but there are bigger challenges in terms of global headwinds, particularly from China.So we've got to figure out a way to manage that. But we are still confident of 5-7% guidance,” he said.
China’s decision to lower the threshold for its 10% luxury consumption tax from CNY 1.3 million to CNY 900,000, effective July 20, has brought most of JLR’s Range Rover portfolio under its ambit. “We’re putting through plans to see how to mitigate that, but it is well within the envelope of the 5-7% guidance we have put out,” Balaji said, adding that internal cost reduction initiatives totalling £1.4 billion over two years will help offset pressures.
“The combination of cost outs, mix, and whatever residual pricing is needed will be the way we manage this,” he said. “But it’ll have to be done prudently to ensure that weak customer sentiment… we don’t spook that. So far, demand has been good, but our focus remains to build the order bank, ensure that your fundamentals of dealer profitability and everything else are well controlled.”
On the outlook for margins, he pointed to the sequential improvement for the rest of the year: “The combination of lower tariffs and cost takeout plans should start improving profits in Q2, Q3, and Q4 in that order. It will keep building as the savings measures kick in.”
Balaji dismissed external criticism, including recent remarks by former U.S. President Donald Trump questioning JLR’s rebrand and leadership changes. “Despite a substantially challenging quarter, we’ve delivered our 11th successive profitable quarter. We are debt-free at this point in time, and therefore, we believe we are on the right track,” he said.
JLR is pushing ahead with key product launches, including the Range Rover Electric, which now has a waiting list exceeding 65,000 units, and the new Jaguar line-up. Balaji indicated that while the company is not chasing aggressive volume growth in the near term, it will focus on building a healthy order bank and safeguarding dealer profitability until market sentiment improves.