Why Tata Motors Shares Fall: Earnings Estimates Trimmed Despite US-UK Deal

Tata Motors is back in the spotlight, but not for a good reason. Last week, its shares dropped sharply, even after a big trade deal between the US and the UK. We all thought this deal would boost business, especially for JLR (Jaguar Land Rover). But things didn’t go as expected.

Instead of rising, the stock fell. Why? The main reason is that analysts reduced their profit projections. JLR warned about lower profits and weaker cash flow for the next few years. This scared investors.

What the US-UK deal means, and why the market still feels unsure. Let’s dig in and see what’s next for Tata Motors.

Recent Stock Drop

Tata Motors stock slid roughly 1.4% on June 17, making it one of the top losers on the Nifty that day. Over the past five trading sessions, the stock dropped over 8%. This decline came even after the US‑UK trade pact was announced.

 What Triggered the Drop?

• JLR lowered its EBIT margin estimate for FY26 from nearly 10% to between 5% and 7%, pointing to pressure from U.S. auto tariffs.
• Free cash flow is now expected to be near zero this year, down from around £1.5 billion last year.
• Analysts at Jefferies, Nomura, and Motilal Oswal lowered Tata Motors’ FY26–FY28FY26–FY28 profit forecasts by 12–19%, citing tariff pressure, soft China sales, and currency shifts.

 US–UK Trade Deal: Small Relief

• The deal allows UK-made vehicles into the US at a reduced 10% tariff, down from about 27.5%, but limits it to 100,000 units each year.
• This helps JLR but is limited in scope. Key models like the Defender made in Slovakia aren’t covered.
• The deal offers guidance but not a full fix for JLR’s margin challenges.

  Broader Challenges for JLR

• The US still imposes 25% tariffs on EU‑made vehicles, affecting many JLR models.
• Demand in China remains weak, hurting sales and margins.
• JLR is investing heavily in EVs and brand building, while managing rising costs and supply‑chain pressures.

  Tata Motors’ Response

• Cost saving: JLR plans to cut £1.4 billion annually starting H2 FY26.
• New EVs are due soon, including the electric Range Rover, Jaguar EV, and Freelander EV in China.
• Tata is pushing for broader trade talks while maintaining medium- to long‑term margin goals (~10–15%).

 Analyst Ratings & Outlook

• Moody’s affirmed Tata’s Ba1 rating and gave JLR a positive outlook, citing strong financial policies.
• Morgan Stanley uses an “Equal-weight” rating and Rs 715 target, noting recovery will be gradual.
• Jefferies remains cautious, lowering its rating to “Underperform” with a ₹600 target.
• Nomura sees cost cuts and EV investments leading to a margin rebound by FY27–28.

  What Investors Should Watch

• JLR’s quarterly updates on margins and cash flow.
• How future trade agreements expand the vehicle quota.
• Execution of cost-saving and EV rollout plans.
• External factors: China demand, oil and commodity prices, and further tariff changes.

Conclusion

Tata Motors’ shares dropped mainly because JLR cut its margin forecast and said cash flow would be nearly zero. The US–UK deal helped, but was too small to offset bigger problems. Investors should track cost cuts, EV launches, and trade updates in the months ahead.

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Disclaimer:

This content is made for learning only. It is not meant to give financial advice. Always check the facts yourself. Financial decisions need detailed research.