Tata Motors Passenger Vehicles Ltd (TMPV) expects commodity cost pressure to worsen in the September quarter, potentially prompting the automaker to take further price increases across its passenger vehicle portfolio to protect margins.
In the quarter ended June, commodity inflation affected the automaker’s domestic passenger vehicle business by an amount equivalent to nearly 4.5% of revenue, according to Shailesh Chandra, Managing Director and CEO, Tata Motors PV.
The pressure is unlikely to ease immediately. “Quarter 2 is going to hit us badly. Not only us, the industry will get hit with additional increases,” Chandra said during a media call held to discuss the company's Q1 performance.
The automaker plans to counter the increase through accelerated cost reductions and gradual price hikes rather than passing the entire increase on to customers immediately.
“In the car industry, you don't immediately pass on these increases. First, there is always an attempt to do aggressive cost reduction,” Chandra said. Price increases, he added, would be “more gradual, more calibrated”.
TMPV has already increased prices of its passenger vehicle portfolio, including internal combustion engine and electric vehicles, by up to 1.5% from July 1 to partially offset higher input costs and inflationary pressure.
Input Costs Rise
The pressure comes amid a broader rise in wholesale input costs in India. The government identified basic metals, mineral oils, and chemicals among the major contributors to wholesale inflation in June. Basic metals are particularly relevant to vehicle manufacturing, which consumes large quantities of steel, aluminium and other metals.
Tata Motors PV said the commodity shock was the primary reason for pressure on its domestic margins during Q1. The business also faced a roughly 1% seasonal impact related to the Indian Premier League, according to Chandra.
Despite the combined impact, Chandra said cost-reduction measures helped prevent the entire increase from flowing through to margins.
The company also expects benefits from the government's production-linked incentive scheme. Chandra said some PLI benefits could not be accrued during Q1 because several new models launched during the quarter required fresh applications.
EV Costs Face Additional Pressure
The inflationary challenge could be greater for electric vehicles.
Chandra said Tata Motors had seen battery cell costs increase by around 10% quarter on quarter, which could make the near-term inflation outlook for EVs slightly more adverse than for ICE vehicles.
The company managed EV cost inflation at broadly similar levels to ICE vehicles during Q1 but expects pressure to increase.
Tata is responding with a steeper cost-reduction programme for EVs, including the redesign of some subsystems, Chandra said. It has already increased EV prices in July and could consider another increase alongside any further revision for ICE vehicles.
The cost pressure comes at a time when Tata is rapidly scaling its electric vehicle business. EV volumes more than doubled to over 34,000 units in Q1, while EV penetration in its domestic portfolio reached 19%.
Consolidated Profit Falls 80%
At the consolidated level, Tata Motors Passenger Vehicles reported a sharp decline in profitability in Q1 FY27, as higher costs and a weaker performance at Jaguar Land Rover weighed on earnings.
Consolidated revenue from operations rose 9.3% year on year to ₹95,799 crore, from ₹87,677 crore in the year-ago quarter. However, total expenses increased 12.1% to ₹95,338 crore from ₹85,058 crore, outpacing revenue growth.
Net profit fell 80.3% to ₹775 crore, from ₹3,924 crore a year earlier. Consolidated EBITDA margin contracted 130 basis points to 7.4%, reflecting the impact of lower JLR volumes, supply disruptions and higher raw-material costs.
The domestic business, however, remained considerably stronger. Tata PV's revenue increased about 65% year on year to ₹17,900 crore, supported by a 46% increase in volumes. Its EBITDA margin improved 30 basis points to 4.3%, while EBIT margin improved 230 basis points to negative 0.5%.
JLR moved in the opposite direction. Revenue declined 9.6% to around £6 billion and wholesales fell 9.2% to 79,300 units, affected by a fire at a component supplier, disruption linked to the Middle East conflict and the planned wind-down of outgoing Jaguar models.
Tata Motors PV has kept its capex plans unchanged despite the cost pressure. Chandra said the company will continue to rely on cost reductions, improved mix, PLI benefits and calibrated pricing to improve profitability.