Release Date: January 29, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tata Motors Ltd (BOM:500570, Financial) reported a strong performance for the full year, with revenue up 2.7% and EBIT up 60 basis points.
- The company achieved a significant reduction in net automotive debt, with the domestic Indian business back to net cash.
- Jaguar Land Rover (JLR) delivered its highest Q3 revenue ever, with EBIT at 9%, the highest in a decade.
- The company received the eligibility certificate for production-linked incentives (PLI), resulting in a cash inflow of INR142 crores.
- Tata Motors Ltd (BOM:500570) showcased a strong product offensive at the auto expo, including the launch of the all-new Tata Sierra and the upcoming Range Rover Electric.
Negative Points
- The company faced challenges in the China market, impacting JLR's revenue and ROCE targets.
- There was a decline in ASPs for JLR, attributed to China mix and FX impacts.
- The small commercial vehicle segment contracted post-BS VI transition, losing ground to three-wheelers and pickups.
- The company experienced higher VME (variable marketing expenses) and warranty costs, impacting profitability.
- There is uncertainty regarding the electrification journey, which may require continued investment in ICE powertrains, potentially increasing overall CapEx.
Q & A Highlights
Q: Can you explain the reasons for the reduction in JLR's FY25 revenue and ROCE targets, and what are the demand expectations for FY26?
A: The reduction in targets is primarily due to the unexpected downturn in the China market, which affected our volume and revenue. For FY26, while many regions are stable, China remains uncertain. We are cautious about the market's cyclical nature and are focused on maintaining healthy dealer inventory levels, especially in China. Depreciation will remain flat until the launch of new BEV vehicles, which will impact D&A charges in Q4 of the next financial year. - Richard Molyneux, CFO, Jaguar Land Rover
Q: What are the expectations for Tata Motors' market share and volume growth in India with the Curvv launch?
A: The Curvv launch faced initial ramp-up issues and supply chain delays, but these are being resolved. We expect the Curvv to gain traction as awareness grows, similar to the Nexon and Punch models. The industry has been flat with only 2% growth in FY25, but we anticipate a 6-7% growth in FY26, contingent on macroeconomic factors and government policies. - Shailesh Chandra, MD, Tata Motors Passenger Vehicles Ltd
Q: How are Tata Motors' EV margins performing, and what is the impact of PLI incentives?
A: Our EV EBITDA has turned positive at 1.7% without PLI. Structural improvements in mix and localization have contributed to this. PLI incentives help fund CapEx and market development. We aim to maintain breakeven at EBITDA level without PLI, using PLI to support investments. - Dhiman Gupta, Head - Treasury and Investor Relations
Q: With the increasing competition in the EV market, how does Tata Motors plan to maintain its leadership?
A: The expanding market will benefit from increased awareness and ecosystem development. Tata Motors has the advantage of a wide portfolio from INR8 lakh to INR22 lakh, which will be leveraged as the market grows. We expect to benefit from the competition's focus on higher price points, while we target city EVs and expand into Tier 2 and Tier 3 cities. - Shailesh Chandra, MD, Tata Motors Passenger Vehicles Ltd
Q: What is the outlook for JLR's VME and warranty costs?
A: The competitive market may lead to a slight increase in VME, but warranty costs are expected to decrease as we implement corrective actions. We anticipate VME to rise slightly from the current 4.2%, but not to pre-pandemic levels. Warranty costs should start to decline. - Richard Molyneux, CFO, Jaguar Land Rover
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
