Tata Motors’ Growth Plans On Track, Reaffirms Chandrasekaran

Mobility Outlook Bureau
08 Aug 2023
06:51 PM
4 Min Read

The company Chairman says the core businesses of commercial vehicles, passenger vehicles & electric mobility and Jaguar Land Rover are firing on all cylinders.

Tata Motors’ Growth Plans

N Chandrasekaran, Chairman of Tata Motors, told shareholders at the 78th annual general meeting here on Tuesday that its three “very strong businesses” are all geared for growth as well as segment leadership. 

“The commercial vehicles business is focusing on growth as well as profitability in all three platforms: heavy commercial vehicles, intermediate and light commercial vehicles as well as smaller commercial vehicles,” he elaborated. 

The passenger car business “is already a leader in the electric vehicles space” and is committed to maintaining its leadership by bringing the best of technology and “the most delightful customer experience” with new products to be launched in the coming years. In the case of Jaguar Land Rover (JLR), the transition towards electric mobility ”is well on its way” with new launches scheduled in the later part of next year. 

“We have an exciting journey ahead of us and the management teams are very committed and focused towards accelerating our journey towards this transformation in all the three businesses,” reaffirmed Chandrasekaran. Tata Motors, he said, would remain focused on delivering growth, profitability and free cash flows consistently. 

Vehicle sales increased by 23% to 13.36 lakh units and revenues to an all-time high of INR 3.46 lakh crore (up 24%). EBITDA improved to Rs 37,011 Crore (up 110bps) and PAT was INR  2690 crore. The Board has recommended a dividend of INR 2 per share. 

Businesses In The Black 

All three core auto businesses turned profitable in the second half of the year while free cash flow (automotive) for the year stood at INR 7,800 crore, compared to a negative INR 9.5K crore recorded in FY22. Due to this, net automotive debt reduced to INR 43,600 crore. 

The Board recently approved a scheme of arrangement for reduction of share capital through cancellation of ‘A’ Ordinary Shares. “On our net debt journey, I expect Tata Motors domestic business to become near net-debt zero in FY24 and JLR in the following year,” he added.

While elaborating on each of the core businesses, he said commercial vehicles saw a challenging first half in FY23 and refined the operating model to drive profitable growth. “The business moved away from a supply chain push to a demand pull model by focusing on Vahan registration volumes and achieved double-digit EBITDA margins in Q4 FY23,” continued the Chairman.

In FY23, the business recorded revenues of INR 70.8K crore, and delivered EBITDA and EBIT margins of 7.4% and 5.2% (an improvement of 370 bps and 480 bps, respectively over FY 22). 

Tata Motors launched over 40 new products and 150+ variants across segments, to cater to the evolving needs of seamless cargo and people transport across sub segments and applications. “We have introduced EV vehicles towards public mobility and last mile deliveries and will scale them up in the coming years,” said Chandrasekaran. 

CV Transformation 

The CV business was fast transitioning from being a “pure play OEM to a holistic solution provider.” The company was accelerating this transition by creating and delivering more value, a win-win proposition for “both our customers as well as our business”. 

As for passenger cars and electric vehicles, the business registered its highest ever annual sales of around 541,000 vehicles in FY23, a growth of 45% over FY22. EV sales crossed “the coveted 50,000 annual sales milestone” and constituted 12% of the sales portfolio in Q4. “We are stepping-up efforts to further democratise and localise the EV revolution,” said Chandrasekaran. 

Tata Motors retained the number one SUV manufacturer rank for a second successive year and became the number two brand in the Indian car market with NPS (net promoter score which measures the loyalty of a buyer base) score touching 40. 

In FY 23, he continued, the passenger vehicles business recorded the highest ever revenues of INR 47,900 crore, and delivered EBITDA and EBIT margins of 6.4% and 1% (improvement of 110 bps and 300 bps over FY22). With existing capacities nearing saturation, it acquired the Ford plant in Sanand, Gujarat with a capacity scalable to 420,000 units per annum. 

Finally, on JLR, Chandrasekaran said good progress had been made in its 'Reimagine' journey to transform into a modern luxury vehicle business with sustainability at its core. JLR faced a “severe shortage” of semiconductors, especially in the first half of FY23, and as the situation eased in the second half, it witnessed a “consistent increase” in production and sales volumes, particularly of the New Range Rover, New Range Rover Sport, and the Defender. 

JLR On Sound Wicket

JLR delivered a “resilient performance” during FY23 with wholesales of 3,21,362 units (up 9%), recording revenues of £22.8 billion, (INR 240228 crore) up 24.5% from FY 22. EBIT margin of 2.4% and PBT of £97 million (INR 1,022 crore ) “This was better than the £455 million (INR 4,794 crore) loss before tax recorded in the previous year. JLR also delivered a free cash flow of £521 million (INR 5489.4 crore), ” he added. 

It ended this year in a stronger position with a portfolio of attractive products, a “healthy bank” of customer orders touching nearly 200,000 units, lower breakeven and with a clear strategy to 'Reimagine' its renowned brands for global clients. 

“The transformation of Jaguar into an all-electric luxury brand is on track with the first new vehicle expected to be launched in 2024 and customer deliveries starting in 2025. It will also start taking pre-orders for the maiden pure electric Range Rover later this year,” said the Chairman. 

Global Headwinds 

Beyond the core businesses, he said the last 3-4 years had been difficult. While the global geopolitical as well as economic environment “is still evolving”, the world is now moving towards less growth and less inflation. Global GDP growth was expected to be around 2.6% during 2023 and inflation “supposed to fall” from 6.5% in 2022 to 4.0%. 

“There has been divergence because major economies like the US continue to be very resilient. In contrast, the Eurozone and China seem to have a slowdown in the growth momentum. The good news is all major developed nations of the world will avoid a recession,” said Chandrasekaran. 

In this backdrop, India continues to remain “a strong economy” with a projected growth rate of about 6.4% this fiscal year. There was strong activity expected in manufacturing as well as services across sectors. 

In this micro scenario, “we are continuing to witness acceleration” in adoption of digital and artificial intelligence, energy transition and change towards a resilient supply chain. Tata Motors, he said, was incorporating all these with a clear strategic agenda. 

Also Read:

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