Notice
Board’s Report
Corporate Governance Report
Business Responsibility Report
Management Discussion & Analysis
119
Risk Factors
Risks associated with the Company’s Business and the
Automotive Industry.
Deterioration in global economic conditions could have a
material adverse impact on the Company’s sales and results of
operations.
The Indian automotive industry could be affected materially by
the general economic conditions in India and around the world.
The automotive industry, in general, is cyclical, and economic
slowdowns in the recent past have affected the manufacturing
sector in India, including the automotive and related industries. A
continuation of negative economic trends or further deterioration
in key economic metrics, such as the growth rate, interest rates and
inflation, as well as reduced availability of financing for vehicles at
competitive rates, environment policies, tax policies, increase in
freight rates and fuel prices could materially and adversely affect
the Company’s automotive sales in India and results of operations.
In addition, investors’ reactions to economic developments or a loss
of investor confidence in the financial systems of other countries
may cause volatility in Indian financial markets and indirectly, in
the Indian economy in general. Any worldwide financial instability,
including withdrawal from trade pacts by countries in which the
Company operates, could also have a negative impact on the Indian
economy, including the movement of exchange rates and interest
rates in India. In the event global economic recovery is slower
than expected, or if there is any significant financial disruption,
this could have a material adverse effect on the Company’s cost
of funding, portfolio of financing loans, business, prospects, results
of operations, financial condition and the trading price of the
Company’s Shares and ADSs.
The Company’s Jaguar Land Rover business has significant
operations in the United Kingdom, North America, continental
Europe and China as well as sales operations in other overseas
markets across the globe. The automotive market in China
experienced strong growth in Fiscal 2017, with positive growth also
in Europe, the UK and the US. Conditions remained challenging in
emerging markets such as Brazil, Russia and South Africa where
automotive sales deteriorated during Fiscal 2017. Jaguar Land
Rovers’ growth plans may not quite materialize as expected which
could have a significant adverse impact on company’s financial
performance. If automotive demand softens because of lower or
negative economic growth in key markets (notably China) or due to
other factors, Jaguar Land Rover’s operations and financial condition
could be materially and adversely affected as a result.
The Brexit vote, the June 8, 2017 U.K.-election results and the
ongoing negotiations between the United Kingdom and the
European Union to finalize terms of the United Kingdom’s exit
from the European Union has created significant uncertainty
with respect to the United Kingdom’s future relationship with the
European Union, the economic and political future of the United
Kingdom and the legal structure applicable to companies doing
business in the United Kingdom. This uncertainty, along with any
real or perceived impact of Brexit, could have a material adverse
effect on the Company’s Jaguar Land Rover business, results of
operations and financial condition. Deterioration in key economic
factors, such as GDP growth rates, interest rates and inflation, as well
as the reduced availability of financing for vehicles at competitive
rates in countries where Jaguar Land Rover has sales operations
may result in a decrease in demand for automobiles. A decrease in
demand would, in turn, cause automobile prices and manufacturing
capacity utilization rates to fall. Such circumstances have in the past
materially affected, and could in the future, materially affect, the
Company’s business, results of operations and financial condition.
Intensifying competition could materially and adversely
affect the Company’s sales, financial conditions and results of
operations.
The global automotive industry is highly competitive and
competition is likely to further intensify in light of continuing
globalization and consolidation. Competition is especially likely to
increase in the premium automotive categories as each market
participant intensifies its efforts to retain its position in established
markets while also expanding in emerging markets, such as China,
India, Russia, Brazil and parts of Asia. Factors affecting competition
include product quality and features, innovation and the
development time for introduction of new products, cost control,
pricing, reliability, safety, fuel economy, environmental impact
and perception thereof, customer service and financing terms. In
light of the impending Brexit, some of the Company’s EU-based
competitors may gain a competitive advantage that would enable
them to benefit from their access to the European Union single
market post-Brexit. There can be no assurance that the Company
will be able to compete successfully in the global automotive
industry in the future.
The Company also faces strong competition in the Indian market
from domestic, as well as foreign automobile manufacturers.
Improving infrastructure and growth prospects, compared to those
of other mature markets, has attracted a number of international