“Growth in the quarter was impacted due to significant external challenges,” PB Balaji, group chief financial officer of Tata Motors said in its earnings release.
The fall in the revenue of passenger vehicles was due to slow consumer demand and seasonal factors, the company said in the earnings release. It said the Jaguar Land Rover’s revenue was impacted by temporary aluminum supply constraints. Commercial vehicles sales were affected by slowdown in infrastructure project execution, a reduction in mining activity and an overall drop in fleet utilization due to heavy rains, it said.
In the last quarter, the company said that it had an all-time high channel inventory with further buildup.
But Balaji said in the earnings call on Friday that the inventory has been normalised by the end of October. “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 know that October is going to be a strong month, but we have to be sure that we have not pulled forward demand from November,” he said.
The company stated in its earnings release that the festive season and the substantial investments made in the infrastructure will strengthen the business. Balaji said that the second half of the year is expected to deliver better performance, driven by the easing of supply challenges and demand picking up.The company’s consolidated net profit fell 10% year-on-year to Rs 3,450 crore in the second quarter, while consolidated revenue from operations reduced by 3.5% to Rs 1,01,450 crore.The shares of the company closed at Rs 805.70 apiece, down by 1.72% on BSE on Friday, when the benchmark Sensex fell by 0.07%
Tata Passenger Vehicles (Tata PV)
Revenue of Tata Passenger Vehicles (Tata PV) is down by 3.9% year-on-year to Rs 11,700 crore. The PV volumes, driven by slow consumer demand and seasonal factors, reduced by 6.1% to 1,30,500 units.
“The Passenger Vehicle industry in Q2 witnessed around 5% decline in registrations, resulting in the 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. Q3 has started off with a resurgence in industry demand on the back of a robust festive season. Tata Motors recorded its highest-ever monthly registrations of about 68.5k during October, which helped bring down the inventory to normal levels,” Shailesh Chandra, managing director of Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility said.
Tata PV is typically 35-40% in the rural areas and the rest is urban, Balaji said in a media briefing, calling themselves more urban-centric. “As far as the quarter is concerned the overall demand has been very weak, based on multiple factors. I think it’s fair to say that unsustainable levels of inventory got built up by the industry, which is getting corrected quite substantially in the festive season. And therefore, I would expect a decent second half hereon. But the overall year-on-year growth is mid-single digits.”
He added that the company had already predicted a weak first half due to elections and heavy monsoon. “We had called out in May that it’ll be more of a rear-ended recovery and that’s exactly how it is playing out.”
Jaguar Land Rover (JLR)
Revenue of Jaguar Land Rover (JLR) is affected by temporary aluminum supply constraints, the company said. Nearly 6,029 vehicles were also kept on hold for additional quality checks. The revenue for the quarter fell by 5.6% year-on-year to £6.5 billion. However, the full-year guidance for revenue was unchanged at £30 billion.
The decrease in profitability year-on-year reflects lower wholesales and increased marketing expenses and selling costs, partially offset by prioritisation of Range Rover production and material cost improvement, the company said. The profit before tax is £398 million, down from £442 million a year ago.
“We have invested £250m 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,” Adrian Mardell, JLR chief executive, said
Balaji said, “On the JLR side, from a demand perspective, the market that we will watch like a hawk is China, where we are seeing stress in the market… We are in a good place compared to the market, but that does not mean that we are growing to the extent that we should be growing in the market.”
“The challenge in China is the credit availability for the dealers who are there. There has also been a shrinkage in the number of dealer outlets that are there,” Balaji added, saying that one of the bigger worries in China is the dealer finance availability.
Tata Commercial Vehicles (Tata CV)
The revenue of Tata Commercial Vehicles (Tata CV) is down by 13.9% to Rs 17,300 crore. The domestic wholesale CV volumes fell by 19.6% year-on-year to 79,800 units. The company said that the revenue is impacted by a slowdown in infrastructure project execution, a reduction in mining activity and an overall drop in fleet utilization due to heavy rains. The exports fell by 11.1% year-on-year to 4,400 units.
“Going forward, with the rains easing, increased infrastructure spending, and the arrival of the festive season boosting consumption, we anticipate demand to pick up,” Girish Wagh, executive director of Tata Motors said.
