Release Date: November 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tata Motors Ltd (BOM:500570, Financial) successfully launched the Nexon ICNG and 45 kWh models, which have been well-received in the market.
- The company held a groundbreaking ceremony for a new plant in Chennai, showcasing its commitment to expanding production capabilities.
- Jaguar Land Rover (JLR) maintained robust profitability despite external challenges, demonstrating the resilience of its business model.
- Tata Motors Ltd (BOM:500570) continues to lead in the electric vehicle (EV) segment with a 67% market share in the personal segment.
- The company is on track with its decarbonization roadmap, aiming for net carbon zero by 2039 and a BEV derivative for all brands by 2030.
Negative Points
- Tata Motors Ltd (BOM:500570) experienced a 3.5% decline in revenue for the quarter, primarily due to supply chain issues and reduced demand.
- JLR faced production constraints due to a flood at a key supplier, impacting the production of 86,000 units.
- The company reported a decline in EBIT margins due to increased DNA charges and higher sales support expenses.
- The Chinese market presents challenges with industry-wide discounting and overstocking, impacting dealer networks and sales.
- Tata Motors Ltd (BOM:500570) saw a decline in commercial vehicle volumes by 19% year-on-year, affected by external factors like interest rates and reduced mining activities.
Q & A Highlights
Q: How is JLR able to maintain its guidance despite the tough market conditions, and is the 10% EBIT margin target for FY26 still on track?
A: Richard Molyneux, CFO of Tata Motors, stated that JLR is holding its guidance with limited headroom. The production constraints from the flood at the aluminium supplier are largely resolved, allowing for increased production. The natural seasonality and working capital improvements are expected to support cash generation, particularly in Q4. The 10% EBIT margin target for FY26 remains possible, though it is becoming tighter.
Q: What structural changes is Tata Motors making to address the vulnerability of its car business profitability to industry slowdowns?
A: Girish Wagh, Executive Director, explained that Tata Motors is expediting cost reduction actions and leveraging new model launches to improve profitability. The company is also strengthening its dealership network by reducing inventory levels and focusing on dealer profitability. New product launches and diversification are part of the strategy to enhance the product portfolio.
Q: Can you quantify the impact of production loss on JLR's EBIT and provide details on the quality issue with the 6,000 units?
A: Richard Molyneux noted that production was 10,000 units below expectations due to supply issues and a quality hold on 6,000 units. The EBIT would have been within the usual range of 6.5% to 8.8% without these issues. The quality issue was resolved, and the affected units will be wholesaled in Q3. Warranty costs have increased due to inflation and the nature of repairs, despite improvements in vehicle quality.
Q: What is Tata Motors' strategy for positioning its EVs in the Chinese market amid intense competition?
A: Richard Molyneux explained that while lower-priced segments face strong competition from new energy vehicles (NEVs), the higher-end segments where JLR operates do not yet have local BEV competitors. JLR's strategy focuses on maintaining its brand strength and product appeal in the premium market, which remains less affected by the competition.
Q: How does Tata Motors plan to manage the risks associated with achieving its guidance, particularly concerning the Chinese market?
A: Richard Molyneux emphasized the importance of managing risks in China, which remains a concern. The company is focused on cost management and exploring opportunities in other markets to offset potential challenges in China. The guidance is maintained based on expected volume recovery and controlled inventory levels.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
