New Delhi: Auto major Tata Motors saw customer demand for passenger vehicles (PVs) during October turn out to be “stronger than expected”. Fuelled by the buoyant festive season during the month, its inventory levels at the dealerships are now at “normalised” levels of 33 days.
“As far as production is concerned, we will meet whatever demand is there in the market. We don’t have stress on that front. We knew that October is going to be a strong month, but we have to be sure that we have not pulled forward demand from November,” PB Balaji, Group Chief Financial Officer (CFO) at Tata Motors, said during a post-earnings call on Friday.
“November is going to be a pivotal month, because that is typically when the clarity emerges in terms of how much of demand got pulled forward into festive season. If that is able to sustain itself, then I think we should be saying that the worst is behind us,” he said.
During Q2 FY25 (July- September), PV volumes were at 1.30 lakh units, marking a year-on-year (YoY) degrowth driven by slow consumer demand and seasonal factors. Revenues during the quarter were down 3.9% YoY at INR 11,700 crore, while EBITDA margins were steady at 6.2%, down 30 bps YoY despite weak industry demand on account of material cost savings and improved mix.
In Q2, PV (ICE) business delivered consistent 8.5% EBITDA margins, while electric vehicle (EV) business EBITDA was at negative 5%. For the near-term outlook, Tata Motors maintains a cautious stance for domestic PV demand. About 65% of the automaker’s sales come from urban areas, and 35% from the rural.
Further, the PV fleet segment, which accounted for 15% of the total industry EV portfolio, has seen a slowdown in sales and Tata hopes the government will consider providing subsidies. The incentives were withdrawn with the introduction of the government’s Electric Mobility Promotion Scheme 2024 (EMPS), followed by the PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) Scheme in September.
Responding to a query on bringing hybrid technology, Balaji showed optimism. “If the customers want it, we will think about it. But at this point in time, we are not working on it,” he said.
Meanwhile, the market leader in EVs “still remains unconvinced” on offering Battery-as-a-Service (BaaS) model in the country. “We have done the mathematics, we have seen the process. We remain unconvinced, particularly for PVs.” JSW MG Motor India currently offers this model to its EV buyers.
In addition to the existing facilities, the maker of Harrier and Safari is working to set up a new manufacturing plant in Tamil Nadu, expected to be operational by 2027. The plant will manufacture both ICE and EVs for Tata Motors and Jaguar Land Rover (JLR) brands.
Commercial Vehicles (CVs)
In Q2 FY25, domestic wholesale CV volumes were 79,800 units, lower 19.6% YoY impacted by slowdown in infrastructure project execution, reduction in mining activity and an overall drop in fleet utilisation due to heavy rains. “Small commercial vehicles continues to face challenges in the market.”
Revenues were down by 13.9% YoY to INR 17,300 crore, however EBITDA margins improved to 10.8% (up 40 bps YoY) led by savings in commodity costs.
Talking about the H1 performance, Balaji said the industry saw a surprisingly strong first quarter, which was balanced out by more than normal weakness in the second quarter.
He expects the demand to pick up gradually in Q3, led by IL&MCV and buses, followed by M&HCV and SCVPU segment. “As far as October is concerned, we did see the amount of freight being available, and trucks are running much more than what was there in the previous quarter. Nothing is creating a concern as far as the macro drivers for commercial vehicles is concerned.”
The company expects commodities to continue to remain range bound. “Overall we expect a stronger H2 even though we remain watchful on the near-term domestic demand.”
Jaguar Land Rover (JLR)
Revenue for the quarter was GBP 6.5 billion, down 5.6% YoY, while H1 FY25 revenue at GBP 13.7 billion was flat YoY. EBIT margin was at 5.1% in Q2 FY25, down 220 bps compared to Q2 FY24 while H1 FY25 EBIT margin was 7.1%.
The company said the decrease in profitability YoY reflects lower wholesales and increased VME, FMI and selling costs, partially offset by prioritisation of Range Rover production and material cost improvement.
Revenue was impacted by temporary aluminum supply constraints. Going forward, confidence has been laid on strong performance during H2, said Tata Motors.
Balaji noted that China, which is an important market for JLR, is facing industry-wide stress owing to challenges on credit availability to the dealers, some of which have shut down too.
To compare YoY, the automaker said while demand in rest of the markets is normal, China’s performance can be compensated by the UK which was in stress last year. “One of the markets where we had significant challenges last year because of insurance issues was the UK. Now that issue is behind us, and therefore we are able to see order books starting to build quite rapidly over there.”
The automaker plans to “watch China like a hawk” as stimulus programs have been put up by the government. Overall, it expects an all-round improvement in performance during the second half of FY25 and the business to become net debt free by this year.
