Tata Motors shares took a significant hit on January 30, 2025, dropping 8% to reach a 52-week low, after brokerage firm Jefferies downgraded its rating on the stock from “buy” to “underperform.” Jefferies also sharply slashed its price target for Tata Motors to ₹660, a reduction from ₹930, reflecting a growing lack of optimism about the company’s performance in the short term. The downgrade marks a drastic shift in sentiment after three-and-a-half years of being bullish on the stock.
Jefferies’ Concerns: Weak Demand and Rising Costs
Jefferies’ move to downgrade Tata Motors stems from concerns about the weak demand for Jaguar Land Rover (JLR) vehicles in key markets like China and Europe. The brokerage pointed out that rising customer acquisition costs and higher warranty expenses are also weighing on the company’s prospects. These factors have led Jefferies to lower its estimates for the company’s earnings for the financial years 2025 to 2027 by 7% to 11%, with earnings per share (EPS) estimates revised downward by 5% to 10%.
The downgrade comes at a time when Tata Motors is grappling with several headwinds. Demand for both its commercial and passenger vehicles is slowing, compounded by fierce competition in the rapidly growing electric vehicle market. This has put pressure on Tata Motors, which has seen its stock price tumble by 36% from its peak of ₹1,179.
Jefferies’ price target of ₹660, which is the lowest on the street, suggests a further 13% downside from Wednesday’s closing levels. The brokerage’s outlook has added to investor concerns, leading to a significant sell-off in the stock.
A Challenging Road Ahead for Tata Motors
The downgrade by Jefferies underscores the growing challenges facing Tata Motors, particularly in its international markets. Despite hopes for a better fourth-quarter performance, Jefferies anticipates that the company will continue to struggle with rising competition in the electric vehicle sector and slowing demand for traditional vehicles. This is a tough pill to swallow for investors who have been hoping for a recovery in the stock after its sharp decline.
However, the revised price target suggests that the market is still uncertain about the company’s ability to overcome these challenges. Jefferies’ cautious outlook highlights the volatility in the automotive sector, especially as companies battle with rising operational costs and changing consumer preferences.
The fall in Tata Motors’ stock price comes at a time when the Indian auto industry is facing significant disruptions. Rising input costs, regulatory challenges, and shifting market demands are all contributing to the uncertainty in the sector.
Despite the gloomy outlook from Jefferies, some analysts remain hopeful that Tata Motors could find its footing in the coming quarters. However, the company will need to address its core challenges, particularly in international markets, to regain investor confidence.