Tata Motors’ UK subsidiary Jaguar Land Rover (JLR) has slashed its Earnings Before Interest and Taxes (EBIT) margins for FY26 to 5- 7 per cent, on risks arising from US tariffs, transition to battery electric vehicles and cloudy outlook for the Chinese market.

The company had earlier forecasted an EBIT margin of 10 per cent.

“These challenges all have the potential to impact EBIT, we are focusing on building our resilience,” the company said in an investor presentation, ahead of its investor day meet.

JLR’s revised EBIT margin is also below the 8.5 per cent margin it achieved in FY25.

The company also said it is expecting free cash flow to be close to zero in FY26, after reporting free cash flow of £1.5 billion in FY25. However, it is expecting an improvement in free cash flow year-on-year for FY27 and FY28.

The US accounts for nearly 30 per cent of its sales and the 25 per cent tariffs announced by the US on foreign-made vehicles, had prompted it to temporarily pause shipments in April. It was still assessing pricing actions in the US, it said.

“We are anticipating resilient financial performance in the face of macroeconomic uncertainty. We remain committed to our investment plans. With sufficient retailer inventory in the US, we put in place a temporary pause on US shipments during April (recommencing end of April) and removed certain variable marketing programmes. This allowed us to continue to develop our mid- to long-term mitigation strategy with our business partners,” JLR stated.

It is committed to the Reimagine investment plans of £18 billion between FY24 to FY28. The investment spend will be funded from operating cash flows. JLR’s cash balance at the end of FY25 was £4.6 billion, while the revenue stood flat year-on-year at £29.0 billion.

The British luxury carmaker said it was continuing to engage with the government, while the UK-US trade deal would reduce tariffs to 10 per cent from 27.5 per cent, though Slovakia was still subject to 27.5 per cent duty.

Moody’s Ratings recently upgraded JLR’s corporate family rating to Ba1 from Ba2 with the outlook remaining positive.

“TML’s India-based operations, excluding JLR, are largely insulated from the impact of U.S. tariffs on automotive imports. However, JLR remains exposed to this risk -- consistent with other global automakers -- given that the U.S. accounted for around 30 per cent of its global vehicle sales in the fiscal year ending 31 March 2025 (FY24–25). These headwinds will likely shrink JLR’s wholesale unit sales and strain its profitability and free cash flow generation during FY25- 26. Another challenge for JLR remains its transition to battery electric vehicles (BEVs), with BEV penetration at just 2 per cent in FY24–25 -- among the lowest in its peer group,” said a statement by the ratings agency.

“JLR is now pivoting to become a modern luxury brand. We think the strategy, if successful, could offer upsides to our margin and FCF expectations, as the JLR turnaround is the most audacious strategic step by the company, which should offer material long-term revenue upside potential. Our target valuation multiples for JLR are set by benchmarking to valuation multiples of BMW and Mercedes-Benz,” stated BNP Paribas.

EV launch

Experts have called out to watch for the launch of JLR’s first electric luxury vehicle in 2026.

“The upcoming launch of the Range Rover Electric later this year and the first all-electric Jaguar model in 2026 are critical

milestones toward JLR’s goal of full electrification by 2030. Timely execution of this strategy will be essential to maintain competitiveness,” said Moody’s.

Published on June 16, 2025