Tata Motors' shares are under pressure once again, weighed down by underperformance in the domestic market compared to rival automakers and a cautious FY26 outlook from its British subsidiary, Jaguar Land Rover (JLR). The stock has slumped over 8% in the past eight sessions and is down 10% year-to-date in 2025, even as the benchmark Nifty50 has gained nearly 6%.
The renewed selling pressure comes as the stock was attempting a recovery after hitting a 52-week low of Rs 536 in early April, a drop of more than 50% from its 52-week high of Rs 1,179. Following JLR's key investor day presentation, several brokerages have turned cautious on the stock, assigning it an 'underperform' or 'sell' rating.
Global brokerage firm Jefferies has reiterated an "Underperform" rating on Tata Motors and slashed its target price to Rs 600, significantly below the current market price of Rs 675.50. Nuvama reiterated ‘reduce’ rating and kept a target price of Rs 670 while factoring in a subdued 3% consolidated revenue and EBITDA CAGR over FY25–27.
JLR in slow lane
In what is perceived as a setback for investors, JLR last week projected that its operating profitability would suffer in 2025-26 and that its free cash flow would take a big hit due to US tariff hikes and a slowdown in the Chinese market. JLR, which contributed 71% to Tata Motor’s total revenue and 79% to its total operating profit in 2024-25, has guided for operating profit margin in the range of 5-7%, which is lower than 8.4% it recorded in the last fiscal, as it would face higher tariffs in its biggest market -- North America.
JLR’s FY25 wholesale volumes reached 400,898 units and retail sales were 428,854 units. These figures represent a slight decline of 0.1% and 0.7%, respectively, compared to the previous year.
Nuvama Institutional Equities also flagged volume contraction at JLR due to the discontinuation of ICE Jaguar models, US tariffs, and a continued weak outlook for the premium segment in China. It expects muted performance in Tata Motors’ domestic commercial vehicles segment due to a high base and rising competition from railways.
Moderation in domestic sales
In India, Tata Motors' growth momentum has taken a pause. Its FY25 domestic sales fell 4% to 912,155 units with commercial vehicle (CV) sales dropping 5% to 376,903 units and passenger vehicle (PV) sales contracting 3% to 553,585 units. The company's electric vehicle (EV) sales also slumped 13% to 64,276 units. Just a year ago, Tata Motors dominated India's EV market with a 73% share, but aggressive competition has eroded its lead, dropping to 35% by May 2025.
This marks a sharp reversal for Tata Motors, which had seen strong growth between FY22 and FY24 and was close to overtaking Hyundai as India's second-largest carmaker. However, Mahindra & Mahindra has now claimed the No. 2 spot. Industry experts have attributed this slowdown to various factors such as intense competition, lack of successful new nameplates and general slowdown in the passenger vehicle market.
Despite several headwinds, Tata Motors management is upbeat about the future. Tata Sons and Tata Motors chairman N Chandrasekaran said on Friday that given the enormous amount of work the company has done over the past years, their businesses are “structured to not just handle this environment but to thrive.”
Speaking at the company's 80th annual general meeting (AGM), Chandrasekaran highlighted US tariff challenges on JLR and the impact of the trade deal with the UK. “If the tariffs had gone to 27.5% (from 2.5%), the impact would have been £1.6 billion. With the UK-US trade deal, that’s coming down to 10%, and JLR’s mitigation steps will reduce the impact to around £600 million,” he said.
Tata Motors Passenger Vehicle Managing Director Shailesh had last month said that they expect to maintain low single-digit growth in passenger vehicle sales this fiscal in line with the overall industry estimate.
Demerger plans
Tata Motors plans to demerge its commercial vehicles and passenger vehicles (including EV and JLR) business in the current calendar year. Can the demerger reverse the company’s fortune for better? According to Chandrasekaran, the demerger would give the two entities freedom to operate better as the technologies are different.
Chandrasekaran had earlier said that the proposed demerger will bring greater strategic clarity and agility, enabling a more focused approach to execution and value creation, delivering long-term returns for shareholders.