Currently reading: JLR profits halved in spring as US import tariffs took hold

Trump's 27.5% import tariffs cost the company £254 million from April-June, before they were reduced

Jaguar Land Rover saw its profits knocked back by half in the three months ending June as US tariffs, warranty costs and a weak dollar took their toll.

The Tata Motors-owned company posted profits before tax of £351 million for the first quarter in its financial year, which runs from April to March. Its profit margin fell to 4.0%, down more than half from 8.9% during the same quarter a year before.

Import tariffs of 27.5% imposed by US President Donald Trump from April cost the company £254 million in the three months, before they were reduced to 10% following an agreement negotiated by the UK government.

JLR is still paying the upper level on tariffs on Land Rover Defender imports to the US, the company’s biggest market, as the EU-negotiated reduction to 15% has yet to be implemented, JLR CFO Richard Molyneux told analysts on the Tata Motors first-quarter earnings call on Friday.

“The external environment presented us with multiple challenges of a scale, a speed, sometimes an unpredictability that can't immediately just be absorbed,” Molyneux said.

Other financial knocks suffered by the company in the three-month period included a £144 million bill for warranty work and a £205 million hit on foreign exchange, largely due to the weaker dollar.

JLR said it had increased prices of the Range Rover line-up in the US by 2% to cover some of the tariff increase. The company has also reduced the Defender 90 range in the country to just the range-topping V8 model.

On the plus side in the quarter, JLR was able to book a £76 million benefit following the US's scrapping on 4 July of fines imposed on companies that failed to meet emissions targets.

Retail customer sales for the quarter dropped 15% to 94,420 as the company wound down its legacy Jaguar business, with only the F-Pace SUV remaining on sale in some markets outside Europe.

Range Rover brand sales were also down after China volumes decreased, while Discovery-branded sales fell 27% after shutdowns caused by the overhaul of the Halewood plant on Merseyside paused Discovery Sport production.

The loss of the Jaguar sales combined with the Discovery Sport production halt helped push the average selling price to a record-equalling £76,000 for the quarter as pricier Range Rovers and Defenders accounted for more of the overall mix.

JLR said the headwinds it faces globally will reduce margins this year to between 5% and 7%, down from 8.9% the year before.

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China remains a problem for JLR. Retail sales there are down 31% since the start of the calendar year as the premium market remains sluggish and the company winds down sales of models built in the country, including the Range Rover Evoque and Jaguar saloons.

In July China unexpectedly reduced the threshold for a 10% luxury tax from 1.3 million RMB (£134,800) to 900,000 RMB (£93,000), capturing “almost all” of Range Rover sales in the market, Molyneux said. “We only had 48 hours notice,” he told investors. JLR has said it would absorb the cost of the luxury tax in the short-term, without passing it to dealers or customers.

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