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Informist, Friday, Nov. 8, 2024

By Anand J.C. and Ketan Barot

MUMBAI – Tata Motors Ltd. expects its passenger commercial vehicles such as buses and vans to do better in the second half of 2024-25 (Apr-Mar) on the back of healthy utilisation and a fair bit of demand, the company's management informed analysts in a post-earnings call Friday. Based on its engagement with financing companies, Tata Motors is seeing some stress building in small commercial vehicles as non-performing assets went up in the September quarter.

Across its commercial vehicle offering, the company is seeing a clear shift towards variants that can carry higher payloads. In the intermediate light, medium commercial vehicles, consumers are seen preferring the 19-tonne variant, its largest sub-segment in that line. In heavy commercial vehicles, a shift is happening towards the 55-tonne tractor trailer for cargo movement, the management said. 

Tata Motors' light commercial vehicles' retail sales increased during the festival season while utilisation of trucks improved during this period due to increased consumption, the company said. In addition, tipper utilisation increased, which indicates that infrastructure projects have started doing well, the company said.

Tata Motors said it is holding on to its earnings before interest and tax margin guidance of 10% for FY25 and FY26. In the September quarter, the company was impacted by supply constraints as its aluminium supplier was affected by floods. The management said supply constraints were largely over now. The company produced 86,000 passenger cars in the September quarter. It said it expects production to pick up going ahead and guided for higher volumes in Oct-Mar. Tata Motors' working capital requirements picked up in the latest quarter, but the company expects it will reverse to favourable levels in the second half of the financial year.

PASSENGER VEHICLES

The passenger vehicles segment of Tata Motors saw the strongest October retail sales in its history due to the festival season, the management said. The inventory levels have decreased to 30-31 days, the company said. The Federation of Automobile Dealers Association said that carmakers' passenger vehicles inventory at the dealer level was as high as 75-80 days in October, which led to sharp discounts ahead of the festival season. 

Unlike some of its peers, Tata Motors opted to cut prices rather than offer heavy discounts to clear out inventory as that would have impacted the brand value of its passenger vehicles, the management said. The company chose to cut prices of certain electric variants to mainstream the offerings, in an attempt to bring EV prices closer to the traditional fuel-run variants, it said. EV prices also came down in Jul-Sept as a result of a significant reduction in cell prices and localisation efforts. Tata Motors does not expect significant price corrections for electric vehicles going forward.

The company informed analysts that it hasn't noticed its electric variants growing at the cost of internal combustion engine offerings. Retail sales of Nexon in October were the strongest since 2017, the company said. The company launched the Curvv and NexonEV in Jul-Sept, but the full benefits of their launches were not seen in the quarter.

Expenses incurred on warranty services in cash and accruals by the company have gone up in recent quarters even though the quality of vehicles has been improving, the management said. This rise is partly because of inflation in labour rates at the dealers' end and also because of the nature of repair. "It is a strange environment where the quality of the vehicles is improving but the amount of money in cash that we are spending on warranty is simultaneously rising," the company's management said. 

JLR STRATEGY

Tata Motors said unlike before, when its Jaguar Land Rover strategy was focused more on volume-led growth, the company is now focusing on value. The company does not intend to return to the older model and will rely on Range Rover, Rover Sport, Defender, the new Jaguar, and Discovery models to drive value ahead of volume.

The company has reduced its free cash flow guidance for the JLR business to 1.3 billion pound sterling from 1.8 billion pound sterling for the year. This is because the market for its JLR range is currently tougher than expected, the management said. In addition, the scale of investment required to keep the fuel-run cars' portfolio going for longer while it invests in architectures for the electric vehicles are also higher than it had envisaged, the company said.

Earlier Friday, the company reported consolidated net profit of INR 33.43 billion for the September quarter on revenues of INR 1.01 trillion for the September quarter. The Street had expected the company's bottom line to jump 32% on year to INR 49.78 billion and total sales were expected to be flat at INR 1.05 trillion for the quarter. Friday, shares of Tata Motors closed 1.7% lower at INR 805.45 on the National Stock Exchange.  End

Edited by Deepshikha Bhardwaj

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