Amid robust operating performance across segments, particularly in the Jaguar Land Rover unit, Tata Motors reported its highest-ever revenue and profit numbers for the full financial year 2024. The profit was driven by strong operating profit, which almost doubled. Tata Motors also became the first domestic automaker to surpass USD 50 billion in annual turnover.
In FY24, Tata Motors clocked Rs 31,399.09 crore in consolidated net profit. This compares with a net profit of Rs 2,414.29 crore reported in FY23. With a 27% year-on-year growth, the company clocked Rs 4.38 lakh crore in revenue from operations during 2023-24. EBITDA rose to around Rs 62,800 crore from Rs 37,000 crore in the financial year 2023. EBITDA margin, or operating profit margin, expanded by 360 basis points to Rs 14.3%.
The automaker revved past the turnover milestone as it managed to sell around 1.4 million vehicles with the ramping up of production at JLR and India passenger vehicle business. Also, a richer product mix and pricing actions in the commercial vehicle segment aid revenue growth. JLR is the main revenue contributor for Tata Motors, accounting for around 70% of its consolidated revenue from operations. The remaining comes from the commercial vehicle business — around 18% and the India passenger vehicle business — 12%.
India business debt free; eyes net cash for JLR this year
Tata Motors also achieved another major milestone during the financial year with its India domestic automotive business turning net cash. The Indian business is now debt-free and turned net cash with Rs 1,000 crore. In FY24, the automaker pared down its net auto debt by around Rs 27,700 core. Total debt stood at Rs 16,000 crore at the end of March, with JLR’s net debt at Rs 7,700 crore and TML Holdings’ debt at Rs 9,900 crore. This compares with a total debt of Rs 43,700 crore at the end of FY23.
The management noted that auto-free cash flow of almost Rs 14,000 crore for the fourth quarter and Rs 27,000 crore for the full year helped the company reduce its automotive debt. JLR and Singapore are two places where we have the debt to be knocked out. And the plan is to ensure this year we take that out completely. Obviously, at a gross level, and then the individual line items will be there. So, Singapore may take slightly longer to take out. But between TML and JLR overall, we should be moving into net cash,” CFO, Tata Motors Group, PB Balaji said in an investor call.
USD 5.1 billion investment for FY25
The company has lined up over USD 5.1 billion (Rs 43,000 crore) for investment in FY25 to sustain its growth momentum. The investment will go for product and technology development in JLR as well as in its passenger and commercial vehicle units.
In FY24, Tata Motors had invested a total of Rs 41,200 crore (around USD 4.9 billion)– Rs 33,000 crore in JLR and Rs 8,200 crore in Tata Motors. “Coming to FY25, JLR will get an investment of broadly Rs 35,000 crore and
Tata Motors will repeat the Rs 8,000 crore,” Balaji said. “We expect investment spend to be around GBP 3.5 billion, and we are holding our target to be net debt zero by the end of this financial year,” JLR CFO Richard Molyneux said.
Tata Group has committed Rs 1.5 lakh crore investment in Jaguar Land Rover this decade as the luxury brand transitions its portfolio into electric. The automaker has signed an MoU with the Tamil Nadu government to invest Rs 9,000 crore in the state over five years for a manufacturing facility.
Domestic demand, JLR growth concerns
Tata Motors reported its record results on May 17, 2024, after the markets closed. When the markets opened for trading on Monday, the automaker’s shares plunged on worries about the domestic demand and JLR margins. Tata Motors shares fell as much as 9.5% in intraday trading on the National Stock Exchange on May 20, reflecting investor concerns.
While announcing the results, the company noted that it remains cautiously optimistic about domestic demand over the full year and expects the first half to be relatively weaker. The management said overall volume in the commercial vehicle segment is likely to remain flat or might see a slight decline during the year while they expect passenger vehicle industry growth to moderate to less than 5% on a high base and high inventory level.
Tata Motors expects JLR’s earnings before interest and taxes (EBIT) margin in the current financial year to remain at the FY24 level of 8.5%. The benefits of a better product mix are likely to be offset by higher marketing spending. JLR, however, retained its FY26 EBIT margin guidance of 10%.
Several brokerages are concerned about the company’s ability to sustain the growth momentum going forward, given the declining order book at JLR and slowing global sales in the segment. Three major global brokerages Goldman Sachs, Morgan Stanley and Nomura have downgraded the stock, as per media reports, while Citi has suspended its rating on the stock following a weaker outlook for FY25. Emkay believes the best may be behind for all Tata Motors’ businesses amid declining JLR order book, the subdued outlook for passenger and commercial vehicle growth in India, and higher marketing expenses. “While there is no doubt that TTMT has delivered an extremely robust performance across its key segments in FY24, there are clear headwinds ahead that are likely to hurt its performance,” Motilal Oswal said in a report.
Early EV adopters declining, focus on developing the market
Tata Motors Ltd believes the early adopters of electric passenger vehicles may be subsiding and the automaker would focus more on developing the electric vehicle market in India this financial year to sustain the growth momentum. The automaker’s electric car sales rose 48% on a year on year to 73,800 units but missed the target of selling 1 lakh electric cars that it had set earlier. “We are clear that the phase of early majority wanting to come in on an enthusiastic mode is probably getting over,” said Balaji.
He noted that the new majority set of customers that are going to come are those who require much more reassurance in terms of charging infrastructure, total cost of ownership, residual value, and variety of models and use cases. “So, our focus this year is to work on the market development front on stepping up the electric vehicle penetration,” he said.
Tata Motors is working with charge point operators and oil-marketing companies to set up highway charging infrastructure and community charging. “We are working with charge point operators to set up almost 22,000 chargers and with solar rooftop companies to make electric vehicles more economically viable. There are a lot of granular interventions we are onto, which would help drive electric vehicle penetration substantially higher,” Balaji added. The management believes the barrier to electric vehicle adoption has come down considerably through new model launches and improving charging infrastructure, and the barriers are expected to reduce further with a slew of launches planned by OEMs in this financial year. When asked about how electric vehicle sales are evolving, Tata Passenger Electric Mobility MD Shailesh Chandra told investors that he clearly sees strong growth in the segment with barriers to adoption being reduced and new model launches, not just by Tata Motors, but also by other automakers. “There will be intensity of pitch in favour of electric vehicles,” he said. “’We should definitely not compare with what is happening in the US or anywhere else because there are other factors which are not applicable to India,” Chandra added.
Push for hybrid vehicles more for “tax breaks” than for environmental benefits
Taking a dig at hybrid vehicles, Tata Motors’ Balaji, cast doubt on the technology’s environmental benefits, suggesting it’s primarily driven by tax breaks rather than a commitment to clean mobility. “Hybrid is being used more as a tax break rather than actually getting into zero-carbon emissions,” Balaji said.
“That makes it even more stark a case for justifying why there needs to be a tax cut on hybrid vehicles,” he said, adding that electric vehicles, on the other hand, are zero-emission technology, though it is not foolproof. Balaji further argued that, from a policy standpoint, hybrids are a temporary solution and shouldn’t be a central focus for government incentives. He further cited a recent report suggesting the realisation that most people who drive hybrid vehicles, do it mostly on petrol, negating potential environmental gains.
This criticism comes amid reports on the government considering tax cuts for hybrid vehicles to promote their adoption. Minister of Road Transport and Highways Nitin Gadkari is reported to have urged the finance minister to reduce the goods and service tax on hybrid vehicles to 12% from 28%.
CV demand to remain flat or decline in FY25
“We are cautiously optimistic for FY25,” Girish Wagh, Head, Commercial Vehicle Business Unit at Tata Motors said. “I think we will see a flat or maybe a slight decline in the overall volumes for the year. That’s where we see,” he added. Wagh, however, claimed most of the parameters remain healthy — in terms of the sentiment index, the freight index, and the usage per month, although they have gone down seasonally. This subdued outlook is in line with the broader industry forecasts. Rating agency ICRA is also projecting the domestic CV industry upcycle to plateau in FY25, with potential volume declines of 4–7%. The slowdown comes on the back of a high base in the previous years and disruptions due to ongoing elections in India.
Plots EV growth beyond subsidies; Push for asset-light model in e-bus procurement
Tata Motors is shifting its electric vehicle strategy to focus on generating demand without relying on government incentives. This comes as FAME 2, a key government scheme promoting EV adoption, expired in March 2024. To address the gap, Tata Motors launched a new 1-tonne variant of its ACE electric small commercial vehicle (SCV). While 17% more expensive than the previous 600 kg FAME-subsidised variant, the company claims a 30% improvement in Total Cost of Ownership (TCO) for customers.
“We were preparing for this post-FAME environment and have launched an exciting range of products,” Waghsaid. The company boasts over 4,300 ACE EVs on Indian roads, accumulating 16 million kms and clocking high repeat purchase orders. Additionally, Tata Motors is a leader in electric buses, deploying over 1,700 units in FY24, bringing its total fleet to 2,600, which have cumulatively covered over 140 million kms. “Going ahead, we continue the engagement with government agencies,” said Wagh, expressing confidence in the payment security mechanism for electric buses. He added, “We are now working on options for the asset-light business model,” hinting at potential participation in future tenders with a focus on operational efficiency. Tata Motors’ comments signal a strategic shift towards building a sustainable EV business model independent of government subsidies. The focus on TCO and exploring asset-light options suggests the company is confident in the long-term viability of its EV portfolio.
This feature was first published in Autocar Professional’s June 1, 2024 issue.