MUMBAI/NEW DELHI (Reuters) – Tata Motors Ltd <TAMO.NS> has cut prices, sales and production targets at its luxury Jaguar Land Rover (JLR) arm in China, a top executive said, as it struggles with high inventories in a slowing market.
Economic growth in China, the world’s biggest car market, has slowed to a 25 year low and a drop in consumer confidence is hurting sales of automakers from BMW <BMWG.DE> to General Motors <GM.N>.
“Production and sales targets (for JLR in China) have been adjusted to reflect the slowing market,” Tata Motors finance chief C. Ramakrishnan said on Friday after the group posted a near halving of quarterly profit. He did not elaborate on the extent of cuts.
Tata Motors has also cut the price of JLR’s locally-made Range Rover Evoque sport-utility vehicle (SUV) by up to 6 percent, and lowered the launch price of its Jaguar XE compact sedan, he said, but did not give price details.
The cut in price and targets for JLR comes weeks after automakers such as BMW, GM and Ford Motor Co <F.N> announced price cuts on their Chinese models to combat weak sales growth.
China’s automakers association has cut its 2015 sales growth forecast to 3 percent from 7 percent.
JLR should see a return to sales growth from the December quarter driven by new launches and as management improves brand awareness for the China-made Evoque, said auto analyst Nitesh Sharma at brokerage Phillip Capital.
Tata Motors’ net profit for the April-June quarter fell 49 percent to 27.69 billion rupees ($434 million), compared with the same period a year ago. Analysts on average expected profit to be 34.59 billion rupees, according to Thomson Reuters data.
Net sales fell 6 percent to 601.8 billion rupees.
JLR’s sales in China fell by a third to 21,920 vehicles during the quarter, pulling down total sales at the luxury carmaker by 1 percent to 114,905. Sales in Europe rose 28 percent to 28,878 vehicles.
The company, which began local production of its Range Rover Evoque SUV in China in October, has been criticised for pricing it too high and was also forced to recall some vehicles over quality issues.
“With the slower retail sales and the headwinds we have seen in China, there has also been a pipeline inventory build up,” said Ramakrishnan, adding JLR had an inventory of 8,000 to 10,000 vehicles.
Strong sales of its JLR cars, especially in China, have long propped up profits at Tata Motors, which has been struggling with sluggish demand for its cars in the last couple of years in India due to an economic downturn.
A slow recovery in India’s passenger vehicle market, where sales grew 6 percent in the April-June quarter, has pushed up Tata Motors’ domestic sales, which rose at double the pace to more than 37,000 vehicles over the same period a year ago.
The company expects to maintain this pace helped by at least two new product launches every year until 2020, according to Mayank Pareek, president of the passenger vehicle unit at Tata Motors, India’s top automaker by revenue.
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