The acquisition of the Sanand Plant will help Tata Motors increase their annual manufacturing capacity by 3 lakh units, which would further be scalable up to 4.2 lakh units per year.
Tata Motors acquiring Ford India's Sanand Plant for Rs 725.7 crore in a deal covering land, machinery and all "eligible employees" will give it more firepower against rivals South Korean Hyundai and domestic auto major Mahindra & Mahindra. While Maruti Suzuki leads the Indian car market by a wide margin, the second spot — dominated by Hyundai India until December 2021 — has been where the big rivalry between the South Korean auto major, Tata Motors and Mahindra & Mahindra, which is not too far behind, is taking place.
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Tata Motors was at the number three position in the Indian car market as per July 2022 auto sales data, with the company reporting a 57 percent jump in year-on-year sales at 81,790. The launch of Nexon EV Max pushed the sales above the 4000-mark in the Electric Vehicles segment.
Hyundai India reported a sale of 56,201 units, 5 percent down year-on-year. While Hyundai has been maintaining its lead at the second spot, Tata Motors has at least twice grabbed the spot albeit with slender margins over the Korean carmaker, which also suffered due to the semi-conductor shortage.
The annual production at the Sanand plant will initially give Tata Motors a new capacity of 300,000 vehicles a year, which could be increased to 420,000. Now, with Tata Motors adding more production capacity, it could take the fight to Hyundai India, particularly with its stable of sports utility vehicles (SUVs) such as the compact SUV Tata Nexon and bigger ones like Tata Safari and Tata Harrier.
The Street is also bullish on Tata Motors with experts seeing the Tata Group auto major's stock price to reflect the growing sales and popularity of its cars.
Rajesh Baheti, MD, Crosseas Capital Services and Director, Association of National Exchanges Members of India had earlier told CNBC-TV18 that players in the SUV segment will continue to outperform. Baheti, however, sees developments related to Tata-owned luxury Jaguar Land Rover (JLR) as an overhang on the stock.
"Tata Motors has a global issue with respect to JLR (Jaguar Land Rover). So sometimes when the domestic market does well for Tata Motors, the JLR bit kind of lags. So it's got a bit more of a challenge," Baheti said.
KRChoksey's Deven Choksey prefers Tata Motors on attractive valuations.
"I would rather prefer to have Tata Motors vis-à-vis M&M because the upside in it probably would have a relatively larger scope at this point," Choksey recently told CNBC-TV18. Shares of Tata Motors ended 0.6 percent up at Rs 468.1 on Monday.
Independent market expert, Kush Ghodasara, CMT, said, "With already having an manufacturing unit in Sanand, Tata Motors have an edge on procurement of its raw materials from in and around ford factory. Secondly, already operating at 85 percent capacity across India, this factory will help to boost EV production and capture maximum market." Ghodasara added that Tata Motors is already pioneering EV market share.
Meanwhile, Tata Motors reported a net loss of Rs 5,006.6 crore for the first quarter ended June 30, 2022, mainly due to a tax charge relating to its Jaguar Land Rover (JLR) unit, up from a net loss of Rs 4,323 crore in the corresponding quarter of the preceding fiscal. The consolidated revenue from operations stood at Rs 71,935 during the period under review, up 8.3 percent against Rs 66,406 crore in the year-ago period.
(Edited by : Ajay Vaishnav)
First Published: IST