Tata Motors PV profit plunges 79% as JLR weighs on India gains
Tata Motors PV reported a 79% year-on-year (y-o-y) fall in consolidated profit to ₹859 crore in the April-June quarter, its third consecutive quarterly decline since demerging from the commercial vehicle business, as weak performance at its British subsidiary — luxury carmaker Jaguar Land Rover (JLR) — and higher raw-material costs offset strong growth in its India passenger-vehicle business.
Consolidated revenue grew 9% to ₹95,799 crore, while the India passenger-vehicle business reported a 65% increase in revenue to ₹17,930 crore and turned profitable before tax and exceptional items.
The steep fall in profits reflected JLR’s 74% y-o-y fall in profit after tax to £66 million, while operating profit margins declined 120 basis points (bps) to 2.8%. A hundred bps equals 1%. The revenue of the British brand fell 10% to £6 billion, which came after it reported a 9% fall in wholesale sales to 87,300 units.
Quick answers to key questions
•5 QUESTIONS
The 79% decline in Tata Motors PV’s profit was primarily due to weak performance at its Jaguar Land Rover (JLR) subsidiary and rising raw material costs, which offset growth in its India passenger-vehicle business.
Jaguar Land Rover’s revenue dropped due to a 10% decline in wholesale sales, impacted by temporary supply constraints and the planned wind-down of outgoing Jaguar models, alongside market disruptions linked to geopolitical conflicts.
Tata Motors’ India passenger-vehicle business saw a 65% increase in revenue, achieving profitability before tax, largely driven by a strong demand for electric vehicles and a 46% rise in sales volume.
Yes, investors should be cautious as the ongoing geopolitical tensions are affecting commodity prices and could impact Tata Motors’ profitability, particularly in its JLR segment.
Tata Motors is focusing on aggressive cost reduction efforts, expediting production-linked incentive accruals, and implementing calibrated pricing actions to enhance profitability amidst rising costs.
The operating profit margin for the first quarter is below the guidance of the British company of 4% for the entire financial year, indicating a challenge to recover profitability in the upcoming quarters to meet its projections to investors.
“JLR delivered first-quarter profits (before tax) of £109 million and an adjusted EBIT (earnings before interest and tax) margin of 2.8%. Despite the near-term industry challenges, we continue to see strong demand for our brands and look forward to the launch of four sensational new products in the coming months: Range Rover Electric, Range Rover Sport Electric, Range Rover GT and Jaguar Type 01,” JLR chief executive P.B. Balaji said in a company statement.
During a virtual media briefing on Thursday evening, Richard Molyneux, JLR’s chief financial officer, said the company faced several market and supply challenges in Q1 that impacted both wholesales and revenue. “But despite this, we still delivered a profit consistent with our four-year guidance, which does demonstrate the resilience of both our brands and our business,” Molyneux said.
India shines bright
The bright spot was the India passenger-vehicle business, which continued to gain momentum even as JLR weighed on the consolidated numbers.
Profit before tax and before exceptional items stood at ₹11 crore compared to a loss before tax of ₹123 crore in the year ago period. The net profit numbers for the India business were not available.
Among passenger vehicle makers, Mahindra & Mahindra has seen a jump in profits while both Maruti Suzuki and Hyundai Motor have recorded declines.
The growth in Tata Motors PV’s India business came on the back of a 46% jump in sales to 182,300 units, driven by GST cuts and strong demand for electric vehicles, a segment where the company has more than a third of the country’s EV market share.
As per the investor presentation, the company’s average monthly EV sales volumes have grown 112% y-o-y in the June quarter to 11,500 units.
“Enhancing our profitability will continue to be one of our central priorities. And as we navigate the challenging commodity environment, we will need to aggressively accelerate our cost reduction efforts, expedite PLI (production-linked incentive) accruals and undertake calibrated pricing actions,” Shailesh Chandra, managing director and chief executive at Tata Motors PV, said during the results media conference.
“So overall, it has been a strong quarter for us. The focus now is on disciplined execution, profitability, scaling up supplies and ensuring that our industry-beating sales momentum continues,” Chandra added.
JLR troubles
In its investor presentation, JLR explained that the company’s performance was affected by several challenges and the winding down of some Jaguar models as it prepares to launch all-electric models early next year.
“Volumes and revenue decreased in Q1, versus the prior quarter and prior year, having been affected by temporary supply constraints, including a fire at a major component supplier at the start of the quarter, market disruption linked to the conflict in the Middle East, and the planned wind down of outgoing Jaguar models ahead of the launch of Jaguar Type 01,” JLR said in its explanation for the quarter.
The hit to operating margins of the British company comes at a time when Balaji, who took over in November, is leading efforts to stabilise the ship after the hit to the company’s profitability and margins owing to US tariff-related impact and cyberattack on its manufacturing facilities last year.
Source: www.livemint.com