Tata Motors, once hailed as a market leader in India's automobile space, is currently facing strong headwinds. After touching record highs, the stock has corrected over 40% from its peak. While the correction in itself is a concern, what’s more important is understanding the reasons behind this decline and whether the company can engineer a turnaround.
This article dives into the three core business segments of Tata Motors, analyses their recent performance, and evaluates the likelihood of a sustainable recovery.
Business Overview
Tata Motors operates across three key segments:
- Electric Vehicles (EVs)
- Jaguar Land Rover (JLR)
- Passenger and Commercial Vehicles
Each of these segments has recently shown signs of stress, contributing to the downward pressure on the company’s share price.
Segment 1: Electric Vehicle Business – Declining Market Share
Tata Motors had an early lead in India’s electric vehicle segment. It enjoyed a dominant 85% market share at its peak, primarily due to its first-mover advantage in an underpenetrated market. However, increased competition is now eroding that lead.
In FY24, Tata Motors’ EV market share dropped to 70%. By the end of FY25 (March 31, 2025), the share had further declined to 53%. This trend is likely to continue, with projections indicating the share may soon fall below 50%.
One of the major reasons for this decline is growing competition from brands like MG Motor and Mahindra. MG’s EV sales have surged, taking its market share from 10-15% to 28%. Mahindra holds about 20% of the EV market. JSW MG Motors, in particular, has seen explosive growth. Importantly, Tesla has not even entered the Indian market yet, and its future entry could pose an even bigger challenge to Tata Motors.
While Tata Motors benefited initially from its early EV push, sustaining that advantage has proven difficult. The declining market share highlights the pressure it faces from new and aggressive players.
Segment 2: Passenger Vehicle Sales – Volume and Market Share Under Pressure
In the internal combustion engine (ICE) segment, Tata Motors is also losing ground. The company is facing tough competition from Maruti and Hyundai, which continue to dominate the market.
In Q1 FY26, Tata Motors reported a 10% year-on-year decline in passenger vehicle sales. Even commercial vehicle sales dropped by around 6%. Most recent data, whether for EVs or ICE vehicles, show a declining trend across the board.
Rising inflation, increasing car prices, and tighter personal budgets are major reasons behind declining consumer demand. Vehicles that were once available for ₹10 lakhs now cost ₹12–13 lakhs. Although recent interest rate cuts may ease some pressure by reducing loan costs, it is still uncertain whether demand will revive meaningfully in the near term.
A key indicator of slowing demand was observed last year during the Diwali season in 2024. Tata Motors began offering massive discounts—ranging from 10% to 30%—across multiple vehicle models. Heavy discounts are often a clear signal that products are not selling at their original price points. This was an early sign of weakness in the company’s core business.
Segment 3: Jaguar Land Rover (JLR) – Hit by Rebranding, Tariffs, and Weak Global Demand
Jaguar Land Rover (JLR) is one of the most critical segments for Tata Motors in terms of revenue contribution. However, this segment is currently under severe pressure due to multiple macro and strategic challenges.
Key factors impacting JLR’s performance:
- Failed Rebranding Strategy: Tata Motors recently attempted a brand overhaul for Jaguar, with a modernized logo and new electric-centric identity. However, the market response was overwhelmingly negative, particularly in Europe. As a result, Jaguar’s April 2025 sales in Europe plummeted by over 97% year-on-year, dropping from 1,961 units to fewer than 50 units.
- Production Cuts: Following the poor reception, JLR halted production of certain Jaguar models. The company has been cautious about new launches due to uncertain demand.
- Trump’s Tariff Policy Impacting US Sales: Under US President Donald Trump’s administration, a new 25% tariff was imposed on cars manufactured outside the United States. This decision directly hit Tata Motors because most of JLR’s manufacturing is located in Europe, not the US. As a result, JLR vehicles exported to the US became significantly more expensive, reducing competitiveness and impacting sales volumes.
- Lack of a US Manufacturing Base: JLR does not operate a significant manufacturing plant in the United States. Hence, it could not shift production to bypass the new tariff barriers, making it vulnerable compared to other automakers with domestic US operations.
- UK-US Trade Agreement Offers Limited Relief: Although the United Kingdom signed a trade deal with the US, reducing tariffs to around 10%, the benefit remains limited. It has not been enough to offset the overall cost pressure and sales decline in the American market.
- EBIT Margin Guidance Slashed: JLR’s management, acknowledging the weak market outlook and rising input costs, has reduced its EBIT (Earnings Before Interest and Taxes) margin guidance from 10% to 5–7%. This downgrade indicates a weaker profitability outlook in the near term.
- Brokerage Downgrades: Multiple brokerage firms have downgraded Tata Motors’ stock following these developments. Analysts cited macroeconomic pressures, weakening JLR margins, and execution challenges in new markets as reasons for the cautious stance.
Can Tata Motors Stage a Comeback?
The possibility of a turnaround hinges on whether Tata Motors can introduce a product that generates strong consumer enthusiasm. In the past, automobile stocks have surged on the back of a successful launch. A relevant example is Eicher Motors, whose Royal Enfield models saw overwhelming demand a decade ago, driving massive share price gains.
Tata Motors had hoped its Jaguar rebranding would be a similar game-changer. However, it failed to strike a chord with consumers. Without a fresh, high-demand product, it will be difficult for the company to reverse the current downtrend.
A successful comeback will require innovation, execution, and a product offering that resonates with the market. If Tata Motors can deliver that, the stock may see renewed investor interest. If not, it may continue to underperform.
Investors should track upcoming launches, quarterly sales data, and management commentary closely. Emotional decision-making should be avoided. The key question is not whether the company has a legacy, but whether it can adapt and lead again in the current environment.
Disclaimer:
This article is for informational and educational purposes only. It should not be considered as investment advice. Always consult with a certified financial advisor before making any investment decisions.
