By Aditi Shah
NEW DELHI (Reuters) – Indian automaker Tata Motors <TAMO.NS> warned on Friday of lower profit at its British luxury car brand Jaguar Land Rover (JLR) for the fiscal year as the coronavirus outbreak has hit sales in China.
The outbreak, which started in China and is spreading globally, has hurt sales in the world’s biggest auto market. The spread of the virus to South Korea, Japan, and Northern Italy is creating similar issues, Tata said in a statement.
“Recognizing the present situation is highly uncertain and could change, the reduction in China sales resulting from the coronavirus presently is estimated to reduce Jaguar Land Rover’s full year EBIT margin by about 1%,” it said.
China is also a major hub for vehicle parts production and a prolonged shutdown at plants has disrupted auto supply chains affecting carmakers in all parts of the world.
“Suppliers in China are resuming operations but remain below full capacity,” Tata said, adding that JLR has managed to avoid potential parts shortages by working closely with its suppliers and with some increased use of air freight.
JLR has been flying Chinese parts in suitcases as well to Britain to maintain production.
Tata Motors warned in January the coronavirus could impact its profit margin forecast of around 3% for the JLR unit for the fiscal year 2020 at a time when it was making progress on a turnaround plan to improve sales in China.
The outbreak is also expected to have some limited impact on Tata Motors’ domestic auto business, it said.
With some flexibility in the vehicle model mix, Tata Motors can maintain production up to mid-March but due to the uncertainties, it could lose out on volumes in the fourth quarter of the fiscal year ending March 31, the company said.
“The timeline for a complete rebalancing of supply and demand is dependent on the further developments in the coming 4-6 weeks,” Tata said.
(Reporting by Aditi Shah; editing by David Evans and Emelia Sithole-Matarise)