Tata Motors experienced a 9.9% decrease in consolidated net profit for the second quarter of the 2024 fiscal year, ending September 2024. The company reported a profit of INR 3,450 crore, down from INR 3,832 crore in the same period last year. Lower sales were the primary factor impacting the decline, attributed to challenges in both their Jaguar Land Rover (JLR) division and their domestic passenger and commercial vehicle markets.
Passenger vehicle sales
Tata Motors’ consolidated revenue from operations reached INR 1,00,534 crore, down from INR 1,04,444 crore in the previous year. Total expenses decreased to INR 97,330 crore from INR 1,00,649 crore during the same period.
The company’s passenger vehicle sales volume decreased 6.1% to 1,30,500 units compared to the same quarter last year. This decline was attributed to a confluence of factors, including sluggish consumer demand, seasonal effects, and the expiration of certain electric vehicle subsidies. Revenues in the passenger vehicle segment also contracted by 3.9% to INR 11,700 crore.
“The passenger vehicle industry in Q2 FY25 witnessed about 5% decline in registrations, resulting in continued build-up of channel inventory. Sales of EVs were additionally impacted by the lapse of certain subsidies. We moderated our offtakes in Q2 to proactively keep our channel inventory under control,” Tata Motors Passenger Vehicles Ltd (TMPV) and Tata Passenger Electric Mobility Ltd (TPEM) Managing Director Shailesh Chandra said.
Tata Motors expects lower industry-wide wholesale volumes in the coming months to address the inventory buildup before the start of the new calendar year. The company plans to focus on driving retail growth through new model launches and marketing campaigns while carefully managing their inventory levels.
“We will drive significant growth in retail on the back of new model launches and a comprehensive marketing campaign while keeping channel inventory in check,” the company said.
JLR sales
JLR, facing temporary aluminum supply constraints and quality control holds on certain vehicles, saw a 5.6% dip in revenue, totaling 6.5 billion pounds. Despite these hurdles, JLR expressed optimism for the remainder of the fiscal year.
“Our teams responded brilliantly to the aluminium supply shortages we experienced in the quarter, so we could deliver as many orders as possible to clients…We have invested 250 million pounds so far to prepare our Halewood UK plant for electric vehicle production, and with strong global demand for our products, we are well positioned to deliver on our commitments again this financial year,” JLR CEO Adrian Mardell said.
Looking ahead, JLR anticipates a strong second half of the fiscal year as the aluminum supply situation stabilizes.
“Both production and wholesale volumes are expected to pick up strongly in the second half as the aluminium supply situation normalises, and we will continue our diligent management of costs. We hold our full-year guidance for revenue of 30 billion pounds”.
Commercial vehicle sales
The commercial vehicle segment also experienced challenges with domestic wholesale volumes declining 19.6% to 79,800 units. Factors impacting this decline included a slowdown in infrastructure projects, reduced mining activity, and lower overall fleet utilization due to heavy rains. Exports in the commercial vehicle segment also fell 11.1% to 4,400 units. Consequently, revenue for the commercial vehicle segment declined 13.9% to INR 17,300 crore.
“Q2 FY25 moderated the positive momentum seen by the commercial vehicles industry at the start of the fiscal, due to slowdown in infrastructure project execution, reduction in mining activity and an overall drop in fleet utilisation due to heavy rains,” Tata Motors Ltd Executive Director Girish Wagh said.
Despite the current headwinds in the commercial vehicle segment, Tata Motors expects demand to gradually recover in the third quarter. This anticipated improvement is based on several factors including the easing of heavy rains, increased infrastructure spending, and the anticipated boost in consumption associated with the upcoming festive season.
“As we move forward, with the rains easing, increased infrastructure spending, and the arrival of the festive season boosting consumption, we anticipate demand to pick up gradually in Q3…Overall, we expect a stronger H2 even though we remain watchful on the near-term domestic demand”.
In terms of the broader economic environment, Tata Motors anticipates commodity prices to remain relatively stable. While remaining cautious about short-term domestic demand, the company projects a stronger second half of the fiscal year.
