Tata Motors’ JLR battles rising trade tariffs, reports steep profit drop in Q1 results

Jaguar Land Rover (JLR) is facing mounting challenges due to increasing global trade tariffs, which are significantly impacting its financial performance. Research from Elara Securities reveals that JLR incurred tariff-related costs of €254 million in the first quarter, accounting for 3.8% of its total sales—one of the highest tariff burdens among luxury automakers.

The financial performance of Tata Motors, particularly through its subsidiary Jaguar Land Rover (JLR), faced significant pressure in the first quarter due to tariff changes imposed by the United States. The tariffs, implemented under the administration of former President Donald Trump, led to a notable decline of 30% in Tata Motors' overall profitability.

JLR's operating profit saw a steep decline of 49%, settling at £351 million or Rs 4,130 crore for the first quarter of the fiscal year 2026. Revenue also dropped by 10% to £6.6 billion or Rs 77,662 crore. The decrease in financial metrics is attributed to the suspension of exports to the US for nearly a month in April, as a response to the heightened tariffs. Moreover, the phase-out of older Jaguar models, primarily manufactured in the UK, further compounded the financial strain. The US remains JLR’s largest export market, constituting nearly a quarter of its sales.

Tata Motors Q1 results

Tata Motors reported a 30.46% year-on-year decline in net profit for Q1FY26, falling to ₹3,924 crore from ₹5,643 crore in the same quarter last year (Q1FY25). Revenue from operations slipped 2.5% YoY to ₹1,03,792 crore, compared to ₹1,06,399 crore in Q1FY25.

The company attributed the weaker performance to lower volumes across all business segments and reduced profitability, particularly at Jaguar Land Rover (JLR).

PB Balaji, Group Chief Financial Officer at Tata Motors, said, “Despite challenging macroeconomic conditions, we delivered a profitable quarter on the back of strong fundamentals. With greater clarity on tariffs and the onset of festive demand, we aim to accelerate growth and regain momentum across our portfolio. As we move towards the planned demerger in October 2025, our priority remains delivering a robust performance in the second half of the year.”

Tariff pressures

Only Porsche experiences a greater tariff impact relative to revenue, with JLR ranking just behind. Despite generating €6.6 billion in revenue, JLR’s tariff cost per vehicle reached €2,910, making it one of the most affected on a per-unit basis. Porsche leads with a steep €5,678 tariff per car.

By contrast, German rivals such as BMW and Mercedes-Benz have been able to mitigate tariff pressures more effectively thanks to diversified manufacturing locations and robust global supply chains. BMW’s tariffs represent just 2% of sales, while Mercedes posts an even lower figure of 1.5%, the smallest share among the group studied. Their tariff cost per vehicle stands at €948 and €799, respectively, illustrating their superior ability to manage trade-related expenses.

Audi, with a larger revenue base of €17.1 billion, faces a tariff impact of €594 million, or 3.5% of sales, underscoring the tariff challenges confronting premium car manufacturers broadly. Nonetheless, JLR’s profit margins appear under greater strain than most competitors.

Factors affecting JLR’s profit

> The bulk of Jaguar Land Rover’s production is UK-based, exposing it to higher trade barriers post-Brexit. UK exports now face added customs checks, tariffs, and logistical hurdles when trading with the EU, China, and the US, escalating costs. Although JLR recently opened a new plant in Nitra, Slovakia, this facility is still ramping up production and cannot yet offset the tariff burden tied to UK manufacturing. In contrast, BMW and Mercedes benefit from established plants in China and the US, allowing them to avoid many tariffs.

> Jaguar is undergoing a strategic shift to become an all-electric luxury brand. This transformation involves higher internal costs and operational complexity, limiting JLR’s ability to absorb external shocks like tariffs. Lower sales volumes during this phase amplify the relative financial impact of tariffs.

> Operating in the premium segment, JLR’s vehicles already carry high production and compliance costs. Added tariffs—especially without sufficient local production—cause per-car costs to surge (€2,910 each), squeezing margins or forcing difficult pricing decisions.

> With revenues reported in GBP but significant sales in EUR and USD markets, exchange rate fluctuations since Brexit exacerbate the effective tariff burden when converted to euros, making financial management more challenging.