CHINA TAX, EU-US TRADE PACT DELIVER TWIN BLOWS FOR JLR

Jaguar Land Rover (JLR) is staring at a fresh wave of geopolitical and policy-driven turbulence, with China slapping a 10% tax on most luxury cars and the European Union (EU) proposing tariff relief only for automakers that manufacture in the US.

- Ayaan Kartik

For the Tata Motors-owned brand, which does not have a manufacturing base in the US, that could complicate recovery efforts and further squeeze profit margins.

Starting July 20, China imposed 10% luxury consumption tax on cars priced over 900,000 renminbi. This covers most of the models sold in the Chinese luxury car market. Earlier, only cars priced above 1.3 million renminbi attracted the levy from the Chinese government.

The timing of the twin hits could hardly be worse. Just a month ago, Jaguar Land Rover trimmed its growth forecast for the current fiscal year. Now, analysts are warning that these latest trade and policy shifts risk derailing the company’s already modest FY26 guidance of 5-7% earnings before interest and tax (Ebit) margin. JLR had banked on reduced tariffs on exports from its Slovakia plant to the US, but that scenario may now be overtaken by events.

The EU, which is finalizing a trade deal with the US for lower tariffs, has proposed that auto firms that have manufacturing in that country and export from there should be given some relaxation from 25% tariffs on imports. “The two combined geopolitical headwinds pose a downward risk to the company’s FY2026 guidance of 5-7% Ebit margin, which had only factored in lower tariffs on its exports from Slovakia to the US after the EU-US trade deal,” analysts at Kotak Institutional Equities wrote in a July 21 note.

Jaguar Land Rover declined to comment on the likely impact of the trade deal and the Chinese luxury tax. JLR rivals’ BMW and Mercedes stand to benefit the most if EU’s proposal is accepted by US as they have plants in the country, from where they export elsewhere.

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