Shares of Tata Motors Ltd dropped nearly 5% during Wednesday’s trading session following a ‘Sell’ recommendation by UBS, which set a target price of ₹825. This downgrade implies a potential 20% downside from the previous day’s closing price, sparking concerns among investors.
Why UBS Recommends ‘Sell’
The UBS report highlights concerns regarding Jaguar Land Rover’s (JLR) flagship models—Range Rover, Defender, and Range Rover Sport—which have significantly boosted the UK-based arm’s average selling price (ASP) and profit margins. However, UBS pointed out that the sustained success of these premium models is beginning to taper off.
The brokerage further noted that JLR’s order book for these high-end vehicles has dipped below pre-COVID levels, signaling reduced demand. UBS also warned that discounting on the Range Rover could increase, as was the case previously with the Defender and Range Rover Sport, which would negatively impact Tata Motors’ overall revenue.
Following the UBS report, Tata Motors’ stock saw a sharp decline of 5% as market participants reacted to the potential risks posed by a slowdown in JLR’s premium segment. Investors are cautious about whether Tata Motors can maintain its growth trajectory, particularly given the rising competition in the luxury automotive market and the broader economic uncertainties.
Outlook for Tata Motors
While Tata Motors has been benefiting from robust performance in its UK-based JLR unit, the possible slowdown in demand for its top models raises questions about future profitability. With UBS projecting further downside and increased price competition, the company faces challenges in sustaining its momentum.
