Indian automaker Tata Motors warned on Friday about lower profit at its British luxury auto brand Jaguar Land Rover (JLR) for the fiscal year as the coronavirus outbreak has impacted sales in China.
The outbreak, which started to spread from China and is now spreading globally, has hurt sales in the country. The spread of the virus to South Korea, Japan, and Northern Italy is creating significant issues, Tata stated.
“Recognizing the present situation is highly uncertain and could change, the decline in China sales resulting from the coronavirus presently is estimated to reduce Jaguar Land Rover’s full year EBIT margin by about 1%,” it added.
China is also a significant center for vehicle parts production and a prolonged shutdown at plants has negatively impacted auto supply chains affecting automakers across the world.
“Suppliers in China are resuming operations but remain below full capacity,” Tata stated, adding that JLR has managed to prevent potential parts shortages by working closely with its providers and with some increased use of air freight.
JLR has been flying Chinese components in suitcases as well to Britain to maintain production.
The automaker warned in January the coronavirus could impact its profit margin forecast of about 3% for the JLR unit for the fiscal year 2020 at a time when it was making progress on a turnaround plan to boost sales in China.
Coronavirus is also expected to have some limited impact on the automaker’s domestic auto business, it stated.
With some flexibility in the auto model mix, the automaker can maintain production up to mid-March but because of the uncertainties, it could lose out on volumes in the fourth quarter of the fiscal year completing March 31, the company stated.
“The timeline for a full rebalancing of supply and demand is dependent on the further developments in the coming 4-6 weeks,” Tata stated.
