Jaguar Land Rover is in trouble with its exports to the US. In the three months ending in June, JLR’s profits were cut in half due to a combination of US tariffs, warranty costs, and a weak dollar.
The company, owned by Tata Motors, reported £351 million in profits before taxes for the first quarter of its fiscal year, which runs from April to March. That’s a 4.0 % plus drop compared to the same quarter last year, when its profit margin was 8.9%.
In April, US President Donald Trump announced import taxes of 27.5%, which cost the company £254 million over the course of three months. After an accord brokered by the UK government, the tariffs were lowered to 10%.
During the Tata Motors first-quarter earnings call on Friday, JLR CFO Richard Molyneux informed investors that the company is still paying the highest level of tariffs on Land Rover Defender imports to the US, its largest market, because the EU-negotiated 15% decrease has not yet been put into effect.
“The external environment presented us with a number of challenges that are too big, too fast, and sometimes unpredictable to just be absorbed right away,” Molyneux stated.
Due in large part to the declining value of the dollar, the corporation also saw a £205 million impact on foreign exchange and a £144 million cost for warranty work over the three-month period.
JLR claimed that in order to partially offset the tariff hike, it had raised the pricing of the Range Rover lineup in the US by 2%. Additionally, the carmaker only offers the range-topping V8 model of the Defender 90 in the nation.
On the plus side for the quarter, JLR was able to record a £76 million bonus after the United States eliminated fines for companies that didn’t reach emissions targets on July 4.
With the corporation winding down its legacy Jaguar business and only the F-Pace SUV still available in some non-European regions, retail customer sales for the quarter fell 15% to 94,420.
Sales of the Range Rover brand also declined as a result of lower China volumes, while sales of the Discovery brand dropped 27% as a result of manufacturing shutdowns.
As more expensive Range Rovers and Defenders made up the majority of the mix, the decline in Jaguar sales and the suspension of Discovery Sport manufacturing contributed to the average selling price for the quarter reaching a record-tying £76,000.
JLR said the headwinds it faces globally will reduce margins this year to between 5% and 7%, down from 8.9% the year before.
China continues to be an issue for JLR. Because the premium market is still weak and the company is reducing sales of domestically produced vehicles, such as the Range Rover Evoque and Jaguar saloons, retail sales have decreased 31% since the beginning of the year.
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China reportedly captured “almost all” of Range Rover sales in the market when it abruptly lowered the threshold for a 10% luxury tax in July from around £134,800 to £93,000. He informed investors, “We only had 48 hours notice.” According to JLR, the luxury tax will not be passed on to dealers or consumers in the near future.