Tata Motors posts Rs 2,190 crore loss in Q1, sees CV sale uptick by Dec, PVs doing better

Tata Motors, India’s largest commercial vehicle maker, expects a turnaround in its commercial vehicle CV sales volumes only after 4-6 months. The coronavirus outbreak-led lockdown has posed the biggest challenge to the OEM, as it has to the rest of the industry. Even as lock restrictions ease, various challenges still remain for the CV business.

“It still has the issues, axle load norms, financing, BS VI and lower GDP growth. While LCVs are slowly starting to pick up, M&HCVs are extremely weak,” said P B Balaji, CFO, Tata Motors, in a conference call soon after announcing the OEM’s Q1 results this evening. The company registered consolidated losses before tax of Rs 6,184 crore and Rs 2,190 crore standalone.

During the first quarter of FY2021, Tata Motors’ CV volumes in the domestic retail market dropped by a whopping 97 percent, to 3,100 units.  However, there’s a green shoot that Balaji says can be seen in the construction segment, which is “slowly picking up”. Small commercial vehicles are leading the slow recovery, but the company is also facing some supply chain challenges in tapping the opportunities fully.  

Passenger vehicles faring better
Even as the bigger pillar of Tata Motors’ business is still weak, its passenger vehicles business unit is doing better. For the quarter ended June, Tata Motors’ market share in the PV industry stood at 9.5 percent, said Balaji. That’s double the market share the OEM saw at the end of financial year 2019-20, resulting in a fourth rank in the Indian PV industry. Tata Motors’ PV market performance is fuelled by its ‘reimagining PV’ strategy with a refreshed portfolio of models. Even as the 9.5 percent market share is a high “in the last many quarters”, it’s not time for Tata Motors to celebrate yet.

“We intend to repeat this many, many more times before we can say that it’s really happened in a sustainable basis,” said Balaji. Tata Motors believes the performance is sustainable and therefore the team is “quietly confident “that it’s on the right track. As reported earlier, Tata Motors’ efforts to strike an alliance with another OEM is also on track. The company’s Board approved the scheme today. Balaji says, while an alliance is a key plan, it’s not top priority currently. “It’s not an imperative for today. It’s an opportunity for tomorrow,” he says. The top priority now is to turn around the company’s business and deliver cash.

For the PV business, 2022-23 is the period when the company expects it to turn cash-positive. The PV business is also facing strong challenges, though they seem to be relatively less than the CV business. Retail sales of Tata PVs fell by 55 percent to 18,600 units during the quarter. In the EV business, Tata Motors says its market share has reached 62 percent during the April-June period.

During the COVID-19 impacted quarter, Tata Motors posted loss before tax of Rs. 2,190 crore with revenue of Rs 2,687 crore at a standalone level. The consolidated revenue was Rs. 31,983 crore, with the loss figure at Rs. 6,184 crore.  The company’s luxury car business arm, Jaguar Land Rover saw a 42 percent drop, to 74,100 units, in retail sales volume during Q1. Loss before tax in the business stood at 413 million pounds sterling (over Rs. 4,000 crore).     

Tata Motors says it looks forward to a gradual pickup in demand and supply situation on the back of ‘overall economic recovery expected in H2 of 2020-21. The company wants to focus on conserving cash by ‘rigorously’ managing cost and investment spends to protect liquidity. The company has announced a cash improvement program of Rs 6,000 crore, including a cost improvement programme of Rs. 1,500 crore. Capex for 2020-21 is expected to be around Rs 1,500 crore, which is almost a third of what the OEM spends usually. With these actions, the company expects improving cash flows for the rest of the year and expects to end the current financial year with positive free cash flows.

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