Shares in Tata Motors fell as much as 5.6% in intra-day trade on worries that China’s new stringent fuel economy standard would adversely impact the Indian auto maker’s Jaguar Land Rover Ltd (JLR) unit.
The slump in Tata Motors weighed heavily on the BSE Sensex, which fell on Thursday for a fifth consecutive session to its lowest close in nearly five months, while broader sentiment stayed weak because of concerns about political instability.
Tata Motors shares closed on the Bombay Stock Exchange at Rs. 273.75, down by Rs. 12.05, or 4.22%, from the previous close on the BSE.
China imposed long-debated stringent fuel economy standards on Wednesday, making life tougher for cash-strapped small domestic brands that are already struggling amid a slowdown of the world’s biggest auto market.
The rules, jointly issued by five government bodies including the National Development and Reform Commission, would cut passenger cars’ average fuel consumption to 6.9 litres per 100 kilometers by 2015 and down further to 5.0 litres by 2020.
China contributes about 20% of JLR’s revenues and nearly 40% of its operating profit, analysts estimate, raising worries that the company may have to invest more to comply with the new norms.
“That’s going to be tough for everyone, especially those small players as they will have to use more fuel-efficient engines and invest in hybrid technologies,” said Yale Zhang, director of Greater China vehicle forecasts at consultancy CSM Worldwide.