Tata Motors, the country's largest commercial vehicle (CV) manufacturer, is optimistic about strong overall CV demand in the fiscal year 2024 (FY24) despite near-term challenges, including rising interest rates, fuel prices, and inflation.
In a presentation to investors, Tata Motors said it expects the government's continued emphasis on infrastructure development to support CV demand in FY24. However, the company said it is also aware of the near-term challenges, including advance buying in Q4 FY23 in anticipation of price hikes post the BS VI Phase II, which will have a near-term impact on demand.
Bharat Stage VI Phase II (BS6.2), also known as Real Driving Emissions (RDE) norms, were implemented on April 1, 2023, and have resulted in car prices going up. These new norms require manufacturers to add hardware to cars and SUVs to meet the more stringent emissions norms.
"We will continue to drive our demand-pull strategy and meet customer preference through innovation, service quality, and thematic brand activation," the company said in its presentation. "We will aim for higher realisations and cost savings to secure double-digit EBITDA margins for FY 2023–24 and improve the performance across all business verticals."
Girish Wagh, Executive Director, Tata Motors, said in his presentation, that FY23 was a year of progression for the Indian CV industry, as it fully emerged from the shadows of two successive years of low volumes in FY 2019–20 and FY 2020–21.
In fiscal 2023, the automaker introduced over 40 products and 150+ variants for passenger vehicles and cargo transportation. Some notable ones include the launch of CNG vehicles in the MHCV (medium heavy and commercial vehicles) category, and the rolling out of the Yodha 2.0, Intra V20 bi-fuel, Intra V50, and ACE EV. Wagh added that Tata Motors' foray into mobility as a service, broke new ground, delivering a profitable revenue stream from the first year itself. The after-sales business grew its revenues by 33%, and the digital business revenues grew by 2.8X on a lower base.
Narrowing differential for CNG prices
In FY 2022-23, a consistent rise in CNG prices and the narrowing differential with respect to diesel prices led to a drop in CNG salience. The recent Cabinet decision on new pricing guidelines for CNG came into effect from April this year, which has led to a 7-9% reduction in CNG prices. This is expected to improve market demand for CNG-powered vehicles in FY 2023-24, Wagh added.