Tata Motors Q1 FY26: Profit Drops 30% as JLR Tariffs and Volume Declines Pressure Margins

Tata Motors Ltd. (TML) reported a subdued start to FY26, with consolidated net profit plunging 30% year-on-year to ₹3,924 crore for the quarter ended June 30. The decline was driven by volume contraction across all business segments and a sharp drop in profitability at Jaguar Land Rover (JLR), which faced headwinds from newly imposed U.S. trade tariffs.

Financial Snapshot

• Revenue: ₹1,04,407 crore (↓ 2.5% YoY)
• EBITDA: ₹9,724 crore (↓ 35.8%)
• EBITDA Margin: 9.3% (↓ 480 bps)
• EBIT: ₹4,500 crore (↓ ₹4,100 crore)
• PBT (before exceptional items): ₹5,617 crore (↓ ₹3,232 crore)
• Auto Free Cash Flow: ₹-12,300 crore (↓ ₹13,000 crore)

Despite the earnings pressure, Group CFO PB Balaji emphasized that the quarter remained profitable, citing strong fundamentals and a sharp reduction in finance costs, which fell by ₹533 crore to ₹938 crore.

Segment Performance

Jaguar Land Rover (JLR)

• Revenue: £6.6 billion (↓ 9.2%)
• EBIT Margin: 4.0% (↓ 490 bps)
• Challenges: A 27.5% U.S. tariff on UK/EU-made vehicles and the phase-out of legacy Jaguar models
• Relief Ahead: New UK-US and EU-US trade deals are expected to reduce tariffs to 10% and 15%, respectively

JLR CEO Adrian Mardell reaffirmed the brand’s commitment to its “Reimagine” strategy, with £3.8 billion earmarked for FY26 investments in next-gen EVs, including the electric Range Rover and Jaguar models.

Commercial Vehicles (CV)

• Revenue: ₹17,009 crore (↓ 4.7%)
• EBITDA Margin: 12.2% (↑ 60 bps)
• Outlook: Expected recovery driven by monsoon normalization, infrastructure activity, and easing interest rates

Passenger Vehicles (PV)

• Revenue: ₹10,877 crore (↓ 8.2%)
• EBIT Margin: -2.8% (↓ 310 bps)
• EV Momentum: Despite industry softness, EVs remained a bright spot with strong customer interest and new launches

PV volumes declined 10.1% to 1,24,800 units, impacted by model transitions for Altroz, Harrier, and Safari. MD Shailesh Chandra noted that upcoming hatchbacks and SUVs will help strengthen the portfolio in H2.

Strategic Moves

Demerger Update

The final hearing for Tata Motors’ demerger scheme has concluded, with October 1, 2025 targeted as the effective date. The move aims to streamline operations and unlock shareholder value.

Iveco Acquisition

TML announced plans to acquire 100% of Iveco Group NV (excluding Defence) for €3.8 billion, subject to regulatory approvals. The acquisition is expected to close in H1 FY26 and will expand Tata’s global footprint in commercial mobility.

Outlook

While macroeconomic headwinds persist, Tata Motors remains cautiously optimistic. The company aims to:

• Leverage festive demand and tariff clarity
• Accelerate EV adoption
• Improve contribution margins through better product mix and cost controls

PB Balaji summed up the quarter: “Despite stiff macro headwinds, we delivered a profitable quarter backed by strong fundamentals. We’re focused on rebuilding momentum across our portfolio.”