Tata Motors Gets Lower Credit Rating Due To Jaguar Land Rover’s Weak Status

S&P Global Ratings has lowered the credit rating of Tata Motors, citing the weaker than expected profitability of Jaguar Land Rover, which is owned by the Indian car maker.

Both Jaguar and Land Rover suffer greatly from trade tensions between China and US, as well as decreasing demand for diesel vehicles in Europe and worries over Brexit, Reuters reports.

S&P cut Tata Motors credit rating to ‘BB-’ from ‘BB’, with the company’s rating remaining on negative watch due to the uncertainty caused by the imminent Brexit deal.

The British car makers’ increased presence in the UK leaves it exposed to the fallout of a potential no-deal Brexit, which could hinder the possibility of a turnaround, according to the rating company.

“JLR will have significant negative free operating cash flows over the next two years, resulting in weak financial ratios for Tata Motors,” said S&P in their statement.

They also added that they expect Tata Motors’ condition to worsen over the next 12 to 18 months, taking into consideration the ongoing cash losses at JLR.

Last October, Tata Motors posted a loss for the second quarter of 2018, but also revealed a new turnaround plan for JLR which included cutting costs and ways to improve cash flow over the next 18 months.