Tata Motors, one of the country's largest automakers, has said that it expects a strong bounce back in passenger vehicle demand over the year, even as the first quarter of this financial year will be adversely impacted due to a variety of factors.
On May 18, Tata Motors declared a net consolidated loss of Rs 7605.4 crore for the quarter ended March, an exceptional write-off owing to cancelled models for its UK-headquartered subsidiary Jaguar Land Rover. This was cushioned by a reversal of Rs 2000 crore earlier provisioned for Tata Motor's passenger vehicle business in India, reflecting a significant improvement in the business's performance.
However, the company's consolidated revenues for the quarter were up 42 percent compared to last year, albeit on a low base.
"We continue to see an order bank for our passenger vehicles," PB Balaji, Group CFO, Tata Motors told journalists in a post-earnings conference call, adding that localised lockdowns are "temporary factors", and the company expects a "bounce back in demand".
While Balaji said the automaker expects the global demand picture to start improving soon, there is pressure on demand in the first quarter in India, owing to supply side challenges, semi-conductor shortages and steel price inflation. Tata Motors has seen a 25 percent increase in manufacturing costs over the past fiscal, according to Balaji.
The company said Tata Motors dealers are currently sitting with 12-15 days of inventory, whereas inventory at JLR was down to 56 days.
Pointing out that customers are choosing to wait for the delivery of their vehicles even as the company works to meet demand, it is providing interest support to dealers wherever there is excess inventory.
Tata Motor's domestic PV business currently forms 8.2 percent of the passenger car market, and the company will look to target a "double digit market share", Balaji said, without giving details about how soon the company was targeting to achieve this.
Commercial vehicles erase Q4 gains
While Tata Motors was upbeat on passenger vehicle demand, it highlited serious challenges to the commercial vehicle market in light of weakened economic activity due to the second wave of Covid-19, and pressures on liquidity with fleet operators and financiers.
Balaji said he expects stress in the commercial vehicle space from a financing perspective, alongside market growth, demand and stagnant freight rates.
While the fourth quarter was strong for commercial vehicles, Balaji said volumes have dropped down significantly since.
Accounting for poor demand, Tata Motors is rationalising production and taking block closures for commercial vehicle production.
(Edited by : Jerome)
First Published: IST