MUMBAI (Reuters) -- India's Tata Motors said today a fall in operating margin at its popular Jaguar Land Rover unit had slowed, raising hopes that China and European economies, although stuttering, would continue to drive demand for its luxury vehicles.
JLR, which Tata bought for $2.3 billion in 2008, has helped offset slowing sales of Tata's own branded cars and trucks in India, where cooling economic growth and high interest rates have hurt business.
Tata Motors vehicle sales fell 3.6 percent to 190,483, the company said.
Net income rose 12 percent to 22.45 billion rupees ($406 million) in the three months ended June 30, the company said in a statement today. Profit at the main Jaguar Land Rover unit was 236 million pounds ($369 million). Both results fell short of analyst predictions.
"Slower industrial growth and a weak economic outlook will impact the overall demand going forward," said chief financial officer C. Ramakrishnan. "Competitive intensity poses a significant challenge to the passenger vehicle industry."
India reported on Thursday its industrial output fell for the third time in four months in June, putting pressure on the government to pull Asia's third-largest economy from its worst slowdown in almost a decade.
However Tata said it expected growth in China would continue to boost JLR, where the fall in operating margin was modest -- to 14.5 percent from 14.6 percent, unlike the previous quarter's slide from 20.1 percent.
JLR sold 83,452 vehicles during the first quarter, 34.4 percent more than in the previous year. China, now its biggest market, accounted for 22.2 percent of the total volume in the quarter, up from 15.7 percent in the same period last year.
"This was expected to be a bad quarter for them,"said Ashish Nigam, auto analyst at Antique Stockbroking in Mumbai. "There were fears that the JLR margin would be even worse, given the tough situation in China and Europe."
Like some rivals, Tata Motors too was forced to shut down two of its factories, for two three-day periods in June in order to balance production with demand.
Bloomberg contributed to this report.
