Profit Shrinks as Tariffs and Volume Decline Hit Tata Motors’ First‑Quarter Earnings

Tata Motors Ltd., India’s largest commercial‑vehicle maker and owner of Jaguar Land Rover (JLR), reported a 62.68 percent year‑on‑year plunge in consolidated net profit to ₹3,924 crore for the April–June quarter of fiscal 2025‑26. The result, announced on July 24 2025, comes amid shrinking volumes across businesses, US import duties on luxury vehicles and base‑effects from a large one‑time gain in the year‑earlier period. While revenues dipped slightly, the sharp decline in profitability underscores how macro headwinds and portfolio transitions are straining the automaker’s earnings.

The April–June quarter (Q1 FY26) marked an inflection point for Tata Motors. In the year‑ago quarter the company delivered its highest‑ever quarterly earnings after booking an ₹8,016 crore gain from the sale of its vehicle financing subsidiary Tata Motors Finance to Tata Capital, which helped boost profit to ₹10,514 croretribuneindia.com. Since then, the company has taken major strategic steps: it plans to demerge its commercial and passenger vehicle businesses by 1 October 2025, has agreed to acquire most of Iveco Group in a €3.8 billion deal expected to close by mid‑2026autocarpro.in, and is investing heavily in the Reimagine program at JLR to electrify its line‑up and reduce dependence on China.

The macro environment, however, turned challenging. In June 2025 the United States imposed 27.5 percent tariffs on certain UK‑made vehicles, impacting JLR’s exportsfinancialexpress.com. Domestic demand for both commercial and passenger vehicles softened due to high interest rates and a delayed monsoon, while production transitions – particularly for updated models of the Altroz, Harrier and Safari – temporarily disrupted volumesautocarpro.in. Lower operating leverage, inventory adjustments and tariff expenses eroded profitability even as management continued to invest in future technologies.

Facts and Data

Consolidated financials (₹ crore)

Metric	Q1 FY26	Q1 FY25	YoY Change
Revenue from operations	104,407	107,288	−2.5 %financialexpress.com
EBITDA	9,200	14,329	−35.8 %autocarpro.in
EBITDA margin	8.8 %	13.3 %	down 480 basis pointsautocarpro.in
Profit before tax (before exceptional items)	5,617	8,794	−36 %autocarpro.in
Consolidated net profit	3,924	10,514	−62.68 %financialexpress.com
Net profit from JVs and associates	132	N/A	–financialexpress.com
Free cash flow (automotive)	−₹12,300 crore	positive	Negative due to working capital changes and tariffsautocarpro.in
Net automotive debt	13,500	11,900	Increase due to free‑cash‑flow deficitfinancialexpress.com

Note: fiscal years run April–March. Tata Motors reports IFRS results for JLR in pounds sterling and Indian GAAP for domestic operations; figures have been converted and rounded for clarity.

Segment performance overview

Jaguar Land Rover (JLR)

• Revenue: £6.6 billion (approx. ₹70,000 crore) – −9.2 % year‑on‑yearfinancialexpress.com.
• EBITDA margin: 9.3 %, down 650 basis pointsautocarpro.in.
• EBIT margin: 4.0 %, down 490 bpsautocarpro.in.
• Profit before tax: £351 millionautocarpro.in.
• Free cash flow: –£758 million due to working‑capital build‑upautocarpro.in.
• Volumes: The wind‑down of older Range Rover and Range Rover Sport models and import tariffs to the US reduced wholesales.

Commercial vehicles (CV) – Tata Motors standalone

• Revenue: ₹17,009 crore, down 4.7 %financialexpress.com.
• Volumes: 88,000 vehicles, with domestic sales down 9 % and exports up 68 %financialexpress.com.
• EBITDA margin: 12.2 %financialexpress.com.
• EBIT margin: 9.7 %financialexpress.com.
• Profit before tax (before exceptional items): ₹1,657 croreautocarpro.in.
• Key drivers: Lower replacement demand for medium and heavy commercial vehicles (M&HCV) and a high base from FY25; bus and van segments showed resilienceautocarpro.in.

Passenger vehicles (PV) – Tata Motors standalone

• Revenue: ₹10,877 crore, down 8.2 %autocarpro.in.
• Volumes: 124,800 units, down 10.1 %autocarpro.in.
• EBITDA margin: 4.0 % (down 180 bps)autocarpro.in.
• EBIT margin: −2.8 %, reflecting an operating lossautocarpro.in.
• Electric‑vehicle (EV) volumes: 16,200 units, flat year‑on‑year; EV penetration 13 %autocarpro.in.
• Key factors: Demand softness ahead of refreshed models; transition in Altroz, Harrier and Safari; promotional costs and lower operating leverage impacted marginsautocarpro.in.

Additional financial notes

• Other income: ₹729 croreautocarpro.in.
• Finance costs: Declined by ₹533 crore due to a lower interest‑rate environmentautocarpro.in.
• Exceptional income in Q1 FY25: ₹8,016 crore gain on sale of Tata Motors Finance (TMF). The absence of this windfall explains most of the year‑on‑year profit declinetribuneindia.com.
• Earnings per share (EPS): ₹8.38 vs. ₹27.65 in Q1 FY25business-standard.com.

Investor‑reaction snapshot

Tata Motors’ stock fell 2.43 percent to ₹633.70 on the National Stock Exchange after the results, while the benchmark Nifty 50 index slipped 0.95 percentndtvprofit.com. Analysts noted that earnings were broadly in line with expectations; a Moneycontrol preview had estimated revenue at around ₹98,600 crore and net profit at ₹3,672 croremoneycontrol.com.

Expert Commentary and Company Views

The management acknowledged the challenging quarter but sought to reassure investors about the underlying momentum.

PB Balaji, Tata Motors Group Chief Financial Officer, said that despite macro headwinds the company has delivered “strong fundamentals across businesses” and remains “focused on improved performance in the second half of the year”financialexpress.com. He pointed out that the consolidated EBITDA margin of 8.8 percent, though lower, was still “respectable” given tariffs and product transitions, and emphasised disciplined cost control. Balaji also highlighted the progress on demerging the commercial and passenger vehicle businesses and on the acquisition of Iveco. He noted that the company expects to complete the demerger by October 2025 and to close the Iveco transaction in the first half of 2026autocarpro.in.

Adrian Mardell, CEO of Jaguar Land Rover, attributed the earnings decline largely to “temporary factors” including US import duties and the winding down of old Range Rover modelsfinancialexpress.com. He stressed that recently signed UK‑US trade deals, effective 30 June 2025, reduce tariffs on UK‑produced luxury vehicles exported to the US from 27.5 percent to 10 percent, while an EU‑US deal announced on 27 July 2025 would drop tariffs on EU‑made vehicles to 15 percentautocarpro.in. These agreements, he said, will “significantly alleviate” tariff pressures in coming quartersautocarpro.in. Mardell reaffirmed JLR’s Reimagine strategy – a £18 billion investment plan over five years to electrify Jaguar and Land Rover – and reaffirmed that JLR expects an EBIT margin of 5–7 percent and near‑zero free cash flow for FY26autocarpro.in.

Girish Wagh, Executive Director, Tata Motors CV Business, acknowledged a “soft quarter” but noted that bus and van segments performed well and that the company maintained its leading market share in commercial vehiclesautocarpro.in. He underscored continued investment in alternate fuels and zero‑emission technologies, citing the launch of the Ace EV and the recently announced joint venture with Iveco to develop hydrogen fuel‑cell trucks. Wagh said the company remains committed to “future‑ready products” and expects improved demand with better monsoons and government infrastructure spendingautocarpro.in.

Shailesh Chandra, Managing Director of Tata Motors Passenger Vehicles, highlighted the robustness of the EV portfolio despite a broader slowdown. He said EV volumes of 16,200 units, though modestly lower year‑on‑year, represented a 13 percent penetration, and noted that July 2025 saw the company’s highest‑ever monthly EV salesautocarpro.in. He expects demand to revive with the launch of the new Harrier and Safari (incorporating the “AVINYA” electric architecture) and the introduction of the Altroz iCNG. Chandra cautioned, however, that pricing discipline and input‑cost pressures will continue to be monitored carefully.

Relating the Results to Past and Global Developments

Comparison with the previous year

• High base effect: The ₹8,016 crore one‑off gain from the sale of TMF in Q1 FY25 dramatically inflated profits in that periodtribuneindia.com. Excluding that exceptional gain, operating profit would have grown modestly.
• Margin normalization: In FY25, JLR delivered record margins (EBIT margin above 11 percent) on strong demand for high‑end Range Rover models and favourable mix. That phase reversed in Q1 FY26 due to model transitions and tariffsautocarpro.in.
• Currency and commodity trends: FY25 saw tailwinds from lower commodity prices and a weak pound sterling; Q1 FY26 faced rising steel prices, supply‑chain inflation and currency volatility.

Global auto industry context

• Tariff regime: The US tariffs on UK‑made vehicles were part of a broader trade dispute that escalated in early 2025. The tariffs particularly hurt JLR because the United States is its single largest market, accounting for roughly a quarter of retail sales. The newly negotiated trade deals reduce tariffs to 10 percent for UK‑manufactured vehicles and 15 percent for EU‑manufactured vehicles, which should ease the headwind from FY26 onwardfinancialexpress.com.
• Electric‑vehicle transition: Tata Motors is accelerating its EV roadmap in line with global peers. JLR is converting the Jaguar brand into an all‑electric marquee and is electrifying Land Rover models through the Reimagine program, while Tata Motors PV is preparing to launch electric versions of the Harrier and Safari and has partnered with Tata Power to expand charging infrastructure. Worldwide, legacy automakers like General Motors, Ford and Hyundai have similarly faced margin pressures due to EV investments; yet early adopters such as Tesla have seen margins compress as price wars intensify. Tata Motors’ EV penetration (13 %) remains ahead of the industry average in India but far behind Chinese peers.
• Global economic outlook: The first half of 2025 saw sluggish growth in major economies. High interest rates dampened vehicle demand globally, while geopolitical tensions and supply‑chain disruptions added uncertainty. A recovery in commodity‑intensive sectors and monetary easing in India could support auto demand in the second half of FY26, but risks remain.

Peer comparison

In comparison to Indian peers, Mahindra & Mahindra posted a 17 percent decline in net profit for the same quarter due to a weak tractor business, while Maruti Suzuki saw profits rise on the back of new SUV launches. Internationally, BMW, Mercedes‑Benz and Volvo flagged that tariffs and slowing Chinese demand are weighing on earnings. JLR’s margins of 4 percent look better than some mass‑market OEMs but below premium peers like BMW (EBIT margin ~11 %).

Forward View

Management guidance

Tata Motors executives maintained their FY26 guidance, albeit with caution:

• Tata Motors standalone: Management expects commercial vehicle demand to improve with the monsoon, favourable government spending on roads and infrastructure, and replacement demand for M&HCVs. The company continues to target double‑digit EBITDA margins and positive free cash flow for FY26.
• Passenger vehicles: Demand is expected to pick up in the festive season as the new Harrier and Safari models – with hybrid and electric variants – hit showrooms. Management aims for EV penetration of around 15 % by FY27, supported by new models, expanded charging infrastructure and the government’s Production Linked Incentive (PLI) scheme.
• JLR: The company reiterated its target of 5–7 percent EBIT margin and near‑zero free cash flow for FY26autocarpro.in. It plans to launch the fully electric Range Rover in 2026 and a new Jaguar electric model in 2025. JLR expects the UK‑US and EU‑US trade deals to provide a “step change” in profitability by lowering tariffs from the fourth quarter.autocarpro.in
• Capital allocation: Tata Motors will allocate the majority of free cash flow towards debt reduction, R&D in electric and connected vehicles, and the Iveco acquisition. Analysts expect the Iveco deal to add scale in commercial vehicles and provide access to advanced powertrain technologies.

Potential headwinds and opportunities

1. Tariff and trade risks: Although trade deals reduce tariffs, unresolved US‑China trade tensions and potential retaliatory duties could still affect JLR’s cost structure. Tata Motors must remain agile and diversify export markets.
2. Competition in EVs: Indian EV adoption is picking up with multiple entrants, including Mahindra’s XUV400 and new EV models from foreign players. Tata must maintain first‑mover advantage by investing in battery technology, software and a reliable charging network.
3. Macroeconomic uncertainties: A sustained economic slowdown or delayed interest‑rate cuts could dampen replacement demand. Conversely, a good monsoon, lower fuel prices and government incentives could boost rural and urban demand for vehicles.
4. Integration of Iveco: The acquisition of Iveco’s non‑defence business is expected to bring synergies but also integration challenges. Success will depend on cross‑cultural integration, product portfolio alignment and realising cost efficiencies.
5. Demerger execution: The planned demerger of commercial and passenger vehicle businesses aims to simplify the structure and unlock shareholder value. The process is subject to regulatory approvals and may introduce transitional costs; however, management believes it will allow each business to pursue independent strategies and potential partnerships.

Closing Takeaway

Tata Motors’ latest quarter underscores how quickly fortunes can reverse in the automobile industry. After a blockbuster year that saw record profits and soaring margins, the company faced a confluence of headwinds – tariff shocks at Jaguar Land Rover, softer domestic demand and the absence of one‑off gains – that pushed consolidated net profit down 62.68 percent to ₹3,924 crorefinancialexpress.com. Yet the underlying story is more nuanced: operating performance remained resilient given the circumstances, with an EBITDA margin of 8.8 percent and positive profitability in commercial vehiclesautocarpro.in. Management remains committed to its long‑term strategies: electrifying the portfolio, investing in hydrogen and alternate fuels, demerging businesses for agility, and pursuing selective acquisitions.

Looking ahead, the success of Tata Motors’ strategy will hinge on executing new product launches, navigating tariff regimes, and managing capital allocation amid volatile markets. The upcoming festive season and new EV models could provide a near‑term boost, while the UK‑US and EU‑US trade deals offer a structural tailwind for JLR. With its strong brands and technological ambitions, Tata Motors is positioning itself for the next phase of automotive transformation, but investors should brace for continued earnings volatility as the company balances legacy businesses with the demands of an electric, connected future.