Tata Motors PV stock: JLR competition, EV transition put pressure on margins; Kotak Neo cuts fair value

Tata Motors Passenger Vehicles (TMPV) is facing a tougher road ahead as Jaguar Land Rover (JLR) deals with rising competition in premium cars, higher costs and the shift towards electric vehicles, according to a Kotak Neo research note.

The research house has cut its fair value for TMPV to ₹285 from ₹310 earlier and retained its Sell rating. The stock was trading at ₹309, compared with the revised fair value.

The main concern is JLR, where the move towards electric vehicles is making the premium car market more competitive. Chinese automakers are gaining ground in Europe and the UK, while JLR also faces pressure from established players such as BMW and Mercedes-Benz.

JLR faces more competition

The rise in electric vehicle adoption in the UK and Europe is lowering entry barriers for Chinese carmakers in the premium segment, the report said.

JLR's Defender franchise is one area to watch. The report pointed to Denza's B5 entering the UK at a price close to the Defender, raising the risk of competition for one of JLR's key models.

Range Rover and Range Rover Sport have better protection because Chinese brands currently do not have similar brand strength in the £100,000-plus segment. Competition from BMW and Mercedes-Benz, however, remains.

JLR also faces a disadvantage in the EV transition because battery, vehicle architecture and computing investments require scale. The report noted that JLR enters this phase with a weaker balance sheet.

The UK, Europe and China together account for 54% of JLR's revenue, making the pace of EV adoption and competition in these markets important for the company.

JLR margins remain under pressure

JLR's margins are another area of concern. The report expects the recovery to take time as the company deals with higher commodity and freight costs, increased marketing expenses, warranty costs related to EVs and recalls, and higher depreciation from capitalised development.

The benefit from a better mix of Range Rover, Range Rover Sport and Defender has also largely peaked.

JLR's margins remained weak even after production normalised in Q1FY27, according to the report.

US strategy

JLR's push into the US market could provide an opportunity as competition in Europe increases and the Chinese market remains difficult.

However, JLR does not have local production in the US, which could make it harder to scale the business. The report estimates that tariffs could cost the company around £400 million.

An agreement with Stellantis could provide a route into the US, although the arrangement is still at the memorandum of understanding stage and JLR would remain dependent on its partner.

India business

The domestic passenger vehicle business has gained market share in recent quarters, helped by new model launches and demand for sub-compact and compact SUVs. Tata Motors PV also continues to lead the domestic EV market.

However, the research note expects market share to peak in the coming months as competitors bring new models to the market.

Profitability remains below expectations because of high structural costs and limited pricing power. The expected expiry of the PLI incentive from 2028 is another concern. The

incentive contributed 25% of EBITDA in FY26, making its expiry a potential drag on the company's long-term targets.

For TMPV, the key issue is whether JLR can protect its premium brands while managing the shift to EVs, and whether the domestic business can improve profitability enough to offset the pressure from JLR.

Also Read - Bank Nifty falls 700 points from Monday close as CAS-driven rally reverses; Yes Bank, Axis Bank trade lower