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SPEED TAKE: Why has the Tata Motors stock picked up speed?

Updated : January 14, 2021 04:20 PM IST

Jaguar Land Rover, Tata Motors' UK-headquartered subsidiary has seen a healthy recovery in volumes.

CLSA has a buy rating on the Tata Motors stock with a target of Rs 290.

At long last, Tata Motors has been in the news for the right reasons. One of India's largest listed automakers has seen its stock price surge over 30 percent in a matter of two weeks.

What's led to the rally and why are investors encouraged? A number of factors seem to be working for Tata Motors at the moment.

Jaguar Land Rover, Tata Motors' UK-headquartered subsidiary has seen a healthy recovery in volumes, led by the Chinese market which will impact margins positively.

The company's domestic passenger car business has been on a steady climb too. Data released by the Society of Indian Automobile Manufacturers (SIAM) showed that Tata Motors was the only listed passenger car maker which showed a growth in sales in April - December period for FY21, with car sales growing 32 percent, even as the larger passenger vehicle segment shrank 16 percent.

The sustained momentum for PV sales in December and January seems poised to benefit players like Tata Motors, which have models gaining significant traction in the market.

Tata Motors has been gaining market share due to the success of its new product line-up, including the premium hatchback Altroz and the compact SUV Nexon. The OEM unveiled a new iTurbo petrol variant for the Altroz, which according to the management, may grow volumes by 10 percent. On top of that, the company unveiled the new Safari today.

Signs of a cyclical recovery in the commercial vehicle market is also helping matters. Sales of Medium & Heavy Commercial Vehicles grew 10 percent in the December quarter and Intermediate Commercial Vehicles grew 7 percent in the same period on a Y-o-Y basis.

The Tesla twist

A lot of the euphoria around the Tata Motors stock was also generated thanks to rumours that the auto maker may be Tesla's partner of choice in the Indian market. The frenzy was put to rest by Tata Motors earlier in the week when it said that "Tata Motors has not taken any decision regarding a strategic partner for its PV business and categorically denies any and all rumours suggesting the same".

Tesla has now incorporated in India, but so far, it is only just that. Reports suggest the company has employed a global consulting firm to liaise and engage with various state governments with respect to its operations, but any announcement of a tie-up with a domestic manufacturer hasn't been made so far.

Tata Motors' electric SUV Nexon is the largest selling electric car in India. In the pipeline is the electric avatar of the Altroz too, with which the company will command an ever-greater share of the EV market in the country.

CLSA has a buy rating on the Tata Motors stock with a target of Rs 290. The stock settled at Rs 245.25, up by over one percent in trade.

SPEED TAKE: Why has the Tata Motors stock picked up speed?

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