Why JLR’s sales slowdown could hit Tata Technologies and Tata Elxsi

Already facing a slowdown in business from European auto firms and competition from Chinese counterparts, at least three analysts said that Tata Group’s engineering, research and development (ER&D) companies will face a further hit to business as JLR is guiding for lower profits and revenue during the current financial year.

Sanket Kelaskar, analyst- institutional equity – Ashika Group, suggests that the long-term technical tie-ups are likely to remain on track but there could be a delay in some spending.

“JLR’s cash flow constraints may delay discretionary spends, but key strategic tech tie-ups are likely to stay on track,” he said.

Analysts at Nirmal Bang said in a 24 May note that the impact of JLR’s slowdown is one of the top challenges for Pune-based Tata Technologies.

“Near-term challenges due to: a) Tariff-led uncertainty and deferring of targets by anchor client (JLR); b) Lumpiness in Technology business; and c) Slowdown in EVs and project cut-down at new-age automotive companies will keep valuation under check followed by a lower earnings growth in FY26,” Nirmal Bang analysts Vaibhav Chechani and Suket Kothari said in the note.

Similar impact on Elxsi

Analysts note a similar impact on Tata Elxsi, which counts JLR as an important client. In an 8 June note, analysts at Kotak Institutional Equities wrote that the company recorded an 8% decline in revenue from JLR in the second half of FY25.

“We do not expect any meaningful increase in revenue run-rate from JLR in FY2026,” the Kotak note said.

In the 12 months through March 2025, both Tata Elxsi and Tata Technologies recorded more than a fifth of their revenue from Jaguar Land Rover. The UK-based company contributed ₹856 crore to Tata Elxsi’s revenue and ₹1,425 crore to Tata Technologies’ revenue in FY25.

Tata Elxsi and Tata Technologies ended FY25 with ₹3,729 crore and ₹5,168.5 crore in revenue, respectively. Tata Elxsi partners with JLR as the research and development centre for their new vehicle programmes. Both Tata Elxsi and Tata Technologies provide product design ideas, digital and engineering services in the areas of mechanical, electronics and software development and complete vehicle programme management.

In 2023, Tata Consultancy Services Ltd won an 800-million-pound order from Tata Motors’ UK subsidiary Jaguar Land Rover to revamp its IT systems.

The company got about ₹3,722 crore (about $430 million) in business from JLR last fiscal, according to the company’s annual report. Any slowdown in revenue from JLR could impact the company’s growth, which is already challenged due to fewer mega deals last year.

Emails sent to Tata Technologies and Tata Elxsi went unanswered but they do not expect a dent in business from JLR. While Elxsi expects business worth ₹1,200 crore from JLR, Tata Technologies expects ₹1,425 crore in FY26, according to the two companies’ annual reports.

For JLR, overall sales last quarter were dragged down by North America, which fell 12% year-on-year. The anticipated slowdown in sales has prompted the company to lower its FY26 earnings before interest and tax guidance to 5-7% from the previously stated 10%.

Moreover, the future is gloomy. The car company’s free cash flow is expected to fall to nearly zero in FY26. As a result of the constraints on JLR’s position, analysts are predicting a slowdown in firms dependent on business from JLR.

Investors sceptical

Investors have remained sceptical about the prospects of the two ER&D firms. In 2025, share prices of Tata Technologies and Tata Elxsi have fallen by 22% and 8% respectively as against an 8% surge in Nifty IT. Notably, Tata Technologies went public in November 2023, a first for the Tata Group in nearly 20 years after TCS’ listing in 2004. 

In a statement to Mint on 8 July, Jaguar Land Rover said that it will maintain its overall guidance for total investments. “In the face of global economic headwinds, we have a clear plan and our investment of circa. £18bn from FY24 to FY28 inclusive remains unchanged,” Jaguar Land Rover said.

JLR did not specify whether there will be any slowdown in business it outsources to engineering and research development firms.

The management of Tata Technologies addressed the slowdown from JLR business when asked by analysts in the January-March earnings call. 

“JLR sits outside of India and is exposed like everybody else to the uncertainties in Europe and the United States, which is their largest market. So, they are impacted in the same way that everybody else is, but Tata Motors has demonstrated resilience through the uncertainties that we have been grappling with over the last six to nine months” said Warren Harris, managing director and chief executive of Tata Technologies, in a post-earnings interaction with analysts on 25 April.

Low expectations of growth in revenue from Jaguar Land Rover also come at a time when the company is undertaking enterprise exercises which will offset the impact of US tariffs to an extent.

“The tariff impact will be primarily on Jaguar Land Rover. Tariff has gone up from 2.5% to 27.5%, and under the UK-US FTA, the tariff is 10%. The overall impact would have been 1.6 billion pounds,” Tata Group Chairperson N Chandrasekaran told shareholders in Tata Motors’ annual general meeting on 20 June.

“But due to the steps taken by JLR, the impact has gone down to 600 million pounds, which is visible in the margin guidance,” he added.