Kotak Institutional Equities has lowered the fair value of Tata Motors Passenger Vehicles (TMPV) to ₹285 from ₹310, while maintaining their 'Sell' rating. According to reports from Kotak Institutional Equities, analysts Rishi Vora and Apurva Desai cited structural pressures at Jaguar Land Rover (JLR), execution risks around its US strategy, and limited room for improvement in the domestic passenger-vehicle business as key factors keeping the outlook challenging. The revised target price implies a downside of nearly 10% from Tata Motors PV's previous closing price of ₹316.50 per share, as reported by CNBC TV18.
The biggest concern for Kotak is the competitive landscape at JLR, particularly as rising battery-electric vehicle penetration in the EU and UK lowers entry barriers for Chinese automakers in premium vehicles. As reported by Kotak, the brokerage specifically flagged the growing threat to JLR's Defender franchise, with Denza's B5 entering the UK at near parity to the Defender. Kotak noted that any meaningful erosion in Defender volumes could have a disproportionate impact on JLR's earnings profile, while Range Rover and Range Rover Sport remain relatively insulated due to Chinese players currently lacking comparable brand equity in the GBP100,000-plus segment.
JLR's push towards the US market is strategically sound, but execution remains the key issue, according to Kotak. The brokerage noted that JLR is among the few premium automakers without local US production, with tariff costs estimated at around GBP400 million. While the Stellantis agreement provides a potential route into the US, Kotak emphasized that it remains a memorandum of understanding and JLR will remain dependent on its partner's priorities. With 54% of JLR revenue coming from the UK, Europe and China, the pace of electrification and rising competition remain key risks.
Kotak expects JLR's margin recovery to remain gradual, citing several pressures including the impact of the repriced hedge book, elevated commodity and freight costs, structurally higher variable marketing expenses, rising warranty costs linked to EV complexity and recalls, and higher depreciation from capitalised development. The brokerage highlighted that the benefit from a richer mix of Range Rover, Range Rover Sport and Defender has largely peaked, adding to the margin pressure challenges. CNBC TV18 reports that Kotak expects a gradual recovery in margins as headwinds from foreign exchange, variable marketing expenses (VME), warranty costs and depreciation persist.
The domestic PV business presents additional challenges for TMPV. According to Kotak, the brokerage expects TMPV's market share to be close to its peak, while profitability remains the weakest among peers. The brokerage expects the PLI incentive to expire from 2028, noting that since the incentive accounted for 25% of EBITDA in FY2026, TMPV could find it difficult to achieve its long-term targets. CNBC TV18 reports that of the 32 analysts that have coverage on Tata Motors PV, 13 have a 'Buy' rating, 10 have a 'Hold' rating, while nine have a 'Sell' call on the stock.
