Tata Motors Shares Rise 2 Percent; Analysts Identify Three Significant Worries for FY26 Due to Tariff Impacts and JLR Issues
Tata Motors Faces Challenges, Analysts Adopt Cautious Outlook
In the automotive industry, Tata Motors is facing a series of hurdles, as indicated by a recent analysis of the company's performance.
Brokerage firm Motilal Oswal has maintained a Neutral rating on Tata Motors, setting a target price of Rs 631. Meanwhile, Nomura has lowered its valuations for the company, with a 10x EV/EBITDA for CV (Commercial Vehicle) and 1x EV/sales for PV (Passenger Vehicle) valuations.
The past year has not been kind to Tata Motors' stock, with a 41% yearly decline. Over the past month, the shares have shown a glimmer of hope, gaining 7%, but the six-month performance remains negative at -7%.
The Q1FY26 EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) of Tata Motors stood at Rs 97.2 billion, marking a 35% year-on-year decline. This decline is largely due to a 46% drop in Jaguar Land Rover's (JLR) earnings, attributed to weak volumes, US tariffs, and forex losses.
The India passenger vehicle business also saw a 36% year-on-year EBITDA drop due to lower sales, higher discounts, and a shift towards new models.
Analysts have taken a cautious to negative outlook on Tata Motors following its sharp 63% plunge in Q1 FY26 consolidated net profit. Nuvama, a brokerage firm, has given a 'Reduce' rating to Tata Motors and reduced its target price to Rs 610 from Rs 670.
Nuvama cites multiple challenges for Tata Motors, including the discontinuation of Jaguar models, market share loss in China, US tariffs, and rising competition from railways in the CV space. Motilal Oswal also flags risks for JLR, such as tariff-led uncertainty for US exports, soft demand in Europe and China, and higher costs from warranties, emissions, and incentives (VME).
Key downside risks for Nomura include tariff risks impacting demand across global markets for JLR and affecting consumer sentiment in India. Key upside risks, however, include demand recovery for JLR and the success of new PV models like Sierra.
Nuvama now expects only a 4% EBITDA CAGR over FY25-28E and has slashed the target price to Rs 610 from Rs 670, reflecting muted growth prospects. They expect a moderate 5% revenue Compound Annual Growth Rate (CAGR) over FY25-28E due to muted volume growth at JLR and in the India CV business.
Despite these challenges, Tata Motors’ management remains optimistic, highlighting efforts to rebuild momentum as tariff clarity emerges and festive demand kicks in, aiming for a stronger second-half performance ahead of its planned demerger in October 2025.
For investors, the combination of sharp earnings decline, margin pressure, and external headwinds such as tariffs and competitive challenges creates a cautious investment outlook. While Tata Motors remains profitable and is focusing on long-term portfolio recovery, brokerages recommend prudence given near-term risks and limited growth visibility in key segments.
In summary, the analysts’ outlook for Tata Motors is guarded, expecting subdued growth and persistent margin challenges, which may weigh on the stock’s performance in the near term. Investors should consider these risks carefully against Tata Motors’ strategic plans to regain momentum. Tata Motors shares have slipped 3.6% in the past five sessions.
- In the face of various challenges, Tata Motors' portfolio has seen a significant decline, with analysts adopting a cautious outlook, as indicated by a recent analysis of the company's performance.
- The stock market's forex sector has not been favorable to Tata Motors, as its shares have experienced a 41% yearly decline, with a further -7% drop over the past six months.
- In addition to the struggles in the automotive industry, Tata Motors' Defi (Distributed Financial Services) sector has been affected by external factors such as tariffs and competitive challenges, creating a cautionary investing environment.
- Despite the market's unfavorable conditions, Tata Motors is seeking to rebuild momentum, aiming for a stronger second-half performance, particularly in the stock-market segments such as commercial vehicles and passenger vehicles.
- For those considering investing in Tata Motors, the combination of sharp earnings decline, margin pressure, and external headwinds such as tariffs and competitive challenges necessitates a prudent approach, given near-term risks and limited growth visibility in key segments.
