British carmaker JLR trims FY26 margin forecast on US tariff concerns

📉 What happened

On June 16, 2025, Tata Motors shares dropped around 5–5.2%, touching approximately ₹674.70 on the BSE. The drop followed Jaguar Land Rover’s (JLR) cautious outlook for FY 26 .
JLR now expects:
- EBIT margins of 5–7% in FY 26, down from earlier guidance of ~10%, and lower than FY 25’s 8.5% .
- Free cash flow to be “close to zero” in FY 26, a sharp drop from the ~£1.5 billion generated in FY 25 .

Tariff pressure: U.S. tariffs (25–27.5%) on UK- and Slovakia-made vehicles forced JLR to pause U.S. shipments. While a UK–U.S. trade deal could reduce tariffs to 10% on up to 100,000 cars, the uncertainty hit margins .
EV and transition investment: Heavy capex—about £3.8 billion—for electrification and new model lines (e.g., the all-electric Range Rover, Jaguar GT, Halewood EV plant) has squeezed near-term profitability .
Strategic importance: JLR accounted for ~71% of Tata Motors’ revenue and ~80% of profitability in FY 25, underscoring its impact on the group’s financials .

Short-term pressure: FY 26 looks weak for margin expansion and cash flow, due to external headwinds and big investments.
Mid-term optimism: Management aims for margins >10% and strong free cash flow by FY 27–28, backed by product pipeline and operational efficiency initiatives like their “reimagine” programme .
Credit perspective: Moody’s affirmed Tata Motors’ Ba1 rating and upgraded JLR’s rating to Ba1, signalling confidence in the company’s long-term resilience .

Expect continued volatility in Tata Motors shares while JLR navigates tariff uncertainties and ramps up EV investments.
Medium-term, the market will focus on whether margin recovery (to 10%+) and positive cash flow materialize in FY 27–28.
Global developments (tariff resolutions, EV adoption trends, semiconductor supplies) will be key catalysts.

If you’d like a deeper dive into JLR’s investment roadmap, tariff negotiations, or Tata Motors’ broader strategic plans, let me know.