India’s third-largest automaker, Tata Motors, on Tuesday reported a surprise loss in the first quarter ended June due to the poor performance of its British luxury car subsidiary, Jaguar Land Rover, and higher raw material costs.

The Mumbai-based company posted a loss of Rs 1,863.57 crore in April-June compared with a Rs 3,199.93 crore profit in the year-ago quarter. Analysts tracked by Bloomberg had expected a profit of Rs 920 crore.

The automaker said it faced multiple challenges at Jaguar Land Rover, including temporary issues such as China’s decision to cut duties as well as diesel concerns in the U.K. and Europe.

“We continue to be impacted negatively by uncertainty over diesels in Europe along with Brexit and additional diesel taxes in U.K,” Jaguar Land Rover chief executive Ralf Speth.

“Given these issues, we will remain focussed on driving growth and simultaneously reducing costs and boosting operational efficiency and capability, taking the necessary steps to shape our future.”

However, the company remains optimistic because its domestic business is growing. It expects its sales and financial results to improve over the rest of the financial year, driven by “continued ramp-up” of new models.

It is hoping its first battery electric vehicle, the Jaguar I-PACE, launched in March will help improve sales.

“Despite these challenges, we remain committed to deliver the planned margins we outlined earlier this year and appreciate the urgency to address our challenges with speed,” said Tata Motors chairman Natarajan Chandrasekaran.

“I am delighted with the progress made by the domestic business on their ‘Turnaround 2.0’ strategy. We continue to gain market share while strongly improving profitability in both commercial vehicles and passenger vehicles.”

The company’s total sales—including domestic sales and exports of its passenger and commercial vehicles—rose 61% to 176,123 units in the first quarter. This included exports of new luxury models such as the Range Rover Velar, Range Rover Sport, Land Rover Discovery, and Jaguar E-PACE.

Tata Motors’ shares closed 1.18% lower on the BSE at Rs 264.15. The results were announced after the market closed.

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