Tata Motors Passenger Vehicles expects further pressure from rising commodity costs, with the impact potentially equivalent to around additional 3% of revenue, according to a senior company official.
The company has already seen a commodity cost increase equivalent to about 4% of revenue in the first quarter, while the impact was around 2% of revenue last year, Tata Motors Passenger Vehicles MD Shailesh Chandra said.
“The quarter 1 we had mentioned that it was about 4% of revenue as the commodity increase. And last year we faced about 2%. This quarter would also be significant increase in commodity price,” he said, adding the additional impact could be around 3% of revenue, with a variation of 0.5 percentage points.
The increase in commodity costs comes amid geopolitical issues seens iver the last five to six months and has become a big cause of concern for the industry. “Cost side is impacted significantly. I have been talking about it,” Chandra said.
He said the company was unable to pass on the increase in costs to customers at the same pace, putting pressure on its margins.
“And the concern for us as a business is that it is not possible to pass on these increases to the market at the speed at which the prices have increased on that side," he said.
"So, that remains a matter of concern, which creates immense margin pressure and immense effort, you know, from a cost reduction perspective."
He added that Tata Motors is working to reduce costs faster while also taking progressive price increases to cushion the impact of input cost inflation. “You are forced to take progressive price increases and residual you are taking as a margin impact,” he said.
The comments come after Tata Motors saw a significant decline in first-quarter profit, with weakness in its JLR business and commodity cost inflation weighing on earnings.