Global demand uncertainty to continue to weigh on Tata Motors: Moody’s

An uncertain pace of recovery in global auto demand will continue to weigh on Tata Motors and its wholly-owned subsidiary Jaguar Land Rover Automotive Plc over the next 12-18 months, Moody’s Investor Service said in a release on Friday.

“We do not expect global auto shipments to recover to pre-pandemic levels until the middle of the decade, while further lockdowns, the transition to electric vehicles, emission compliance requirements and – for JLR –Brexit all pose further downside risk,” says Tobias Wagner, a Moody’s Vice President and Senior Credit Officer.

Tata Motors’ underlying credit profile has deteriorated to a level weaker than JLR’s, but the ratings remains the same thanks owing to a likely support from parent Tata Sons in times of need, it said.

JLR’s rating does not incorporate an up-lift for likely support from parent TML, due to the latter’s weaker credit quality. Still, the subsidiary remains strategically important to both TML and Tata Sons, a credit positive for the rating.

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“TML’s credit profile had previously benefited from the different demand dynamics in its JLR and non-JLR segments, but the pandemic has hurt demand across all major markets, while the profitability and liquidity of its Indian operations also have weakened,” says Kaustubh Chaubal, a Moody’s Vice President and Senior Credit Officer.

A return in outlook to stable for Tata Motors would require an improvement at JLR as the key contributor to consolidated credit metrics, along with a recovery in the profitability of Tata Motors Indian operations.

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