Tata Motors on Friday said it expects limited volume loss in domestic business during January-March 2020 while British arm JLR could see 1 per cent dip in earnings before interest and tax for the full year due to disruption in supply chain and sales decline in China owing to the coronavirus outbreak.
The auto major said JLR sales in China have dropped 85 per cent in February. The joint venture plant in China reopened in the last week of the month and the production will be ramped up as the number of employees returning to work and demand increase, the company said.
"For Tata Motors' domestic business, fourth quarter performance was already planned to be significantly impacted due to the switchover from BS-IV to BS-VI and the shortage of parts is likely to have some additional impact on specific BS-VI models which is expected to be secured in the coming months," the company said in a statement.
While sharing an update on the impact of coronavirus, the company, however, remained optimistic to end the fourth quarter with positive free cash flow.
"With some flexibility in mix (models, trim levels), the current visibility protects production volumes up to mid-March. The further planning horizon contains some uncertainties which are expected to be mitigated to a large extent; situation could lead to limited volume losses in the fourth quarter," Tata Motors said.
It also added that the situation is, however, expected to recover as market demand improves gradually upon transition to BS-VI.
"The timeline for a complete rebalancing of supply and demand is dependent on further developments in the coming 4-6 weeks. Domestic business is positive to overcome the current challenge with a limited impact on its overall FY21 performance," Tata Motors said.
Commenting on the financial impact on the JLR business due to the virus outbreak, the company said, "Recognising the present situation is highly uncertain and could change, the reduction in China sales resulting from the coronavirus presently is estimated to reduce JLR's full year EBIT margin by about 1 per cent."