JLR May Face £1.6 Billion Hit from US Tariffs: N Chandrasekaran

Jaguar Land Rover (JLR), the luxury automaker owned by Tata Motors, may face a £1.6 billion impact due to newly announced US trade tariffs, Tata Group Chairman N. Chandrasekaran said at the company's 80th Annual General Meeting on Friday. However, he noted that mitigation strategies are already underway to reduce the net impact to £600 million.

“Tariff is a major issue, primarily for JLR,” Chandrasekaran said. “Without intervention, JLR’s tariff rate would have gone from 2–2.5% to 27.5%. With the US-UK trade deal, that 27.5% (tariff) will drop to 10%. The overall impact even of the 10% is 1.6 billion pounds. But JLR has taken a lot of steps. With those steps, they will be able to reduce the impact to 600 million pounds,” Chandrasekaran said.

Earlier this week, in an analysts’ call, JLR projected a decline in revenue from £29 billion in FY25 to £28 billion in FY26, citing a range of macroeconomic and industry-specific challenges. The company flagged US tariffs, softening demand in China, currency headwinds, regulatory hurdles, and slower adoption of battery electric vehicles as key headwinds.

One of the most pressing concerns for JLR is the imposition of US tariffs, but the company is also facing weakened demand in China’s premium vehicle segment, where a broader economic slowdown is affecting consumer sentiment.

Additionally, the depreciation of the US dollar against the British pound is expected to impact revenue realisation, despite short-term currency hedges. Meanwhile, evolving regulatory frameworks in key markets like the US and China — especially the need for region-specific development of Advanced Driver Assistance Systems (ADAS) — are adding to operational complexity.

Slower-than-expected adoption of battery electric vehicles (BEVs), driven by patchy charging infrastructure and policy uncertainty, is another factor weighing on sales and investment returns.
Reflecting these challenges, JLR has lowered its EBIT margin guidance for FY26 to 5–7%, down from 8.5% in FY25 and significantly below its previous target of 10%.

The margin pressure, JLR said, will largely stem from trade-related costs, ongoing weakness in China, and higher investments in marketing, sales promotion, and brand building.

Adding to the pressure is suboptimal factory utilisation. In FY25, JLR operated at just 46% capacity utilisation, a level that further strains fixed cost absorption and complicates profitability as volumes weaken.

The company now expects free cash flow to be close to zero in FY26, compared to £1.5 billion in the previous fiscal year, due to lower margins and higher working capital requirements.

To counter these pressures, JLR has initiated a comprehensive cost-reduction program targeting £1.4 billion in annual savings. The plan will focus on reducing material, manufacturing, freight, warranty, and structural costs, while leveraging digital innovation and artificial intelligence to drive operational efficiencies. The cost benefits are expected to begin materialising in the second half of FY26.

Despite the near-term pressures, JLR remains committed to its £18 billion investment plan for FY24-28. For FY26, it has allocated £3.8 billion in capital expenditure, with over 50% earmarked for engineering, more than 20% for facilities, and the remainder for tooling and other initiatives.

JLR’s major upcoming product launches include the Range Rover Electric, the Freelander EV developed in collaboration with CJLR, and a low-volume, high-value Jaguar EV, all slated to support demand recovery from 2026 onward.