Home-grown automaker Tata Motors expects a strong rebound for its Cars and SUVs in the second half of this fiscal. The company has lined up a CAPEX of INR 3,500 crore to align production with the market demand, a top company executive said.
P Balaji, Chief Financial Officer, Tata Motors, said, “We are expecting a sharp rebound, especially in the passenger vehicle segment. This is the reason we have created a ‘Business Agility Plan’ for FY22. We are seeing a clear shift of customer preferences from shared mobility to personal mobility.”
Balaji indicated that there is a strong order book and customers are not cancelling their booking. They are waiting for their cars to be delivered.
At present, the dealers of Tata Motors are maintaining a lean inventory of 10-15 days with a waiting period of four to six weeks on the popular models.
The company ended FY21 with the highest ever sales of 222,025 units in eight years with a market share of 8.2% of the total passenger vehicle market. Tata Motors passenger vehicle sales volume grew by a whopping 69% when overall segment sales fell by 2% in FY21.
Industry analysts are expecting significant growth in passenger vehicle sales of Tata Motors as the company recently refreshed its product portfolio and multiple variant strategy of its products like Nexon, Altroz and Harrier. However, the semiconductor will continue to spoil the party for the next two quarters.
Balaji said, “We are closely working with the suppliers and assessing the market demand. As we see the shortage of semiconductor continue to prevail in the current quarter and will become better in next quarter, and eventually it will smoothen up.”
Concerning Commercial Vehicle Business
In terms of the commercial vehicle business, which contributes over 70% of the total business, Balaji said, he is concerned about the overall situation. The segment is going through stress because of multiple reasons, such as low freight rates and low market demand.
Balaji said, “I do see stress in the current quarter, but hopefully, the demand will start coming back in the later quarters.”
The underlying market dynamics are improving along with improvement in infrastructure investments, which will continue. Apart from that overall scrappage policy will further create demand, he said.
He further said, “To maintain a healthy inventory at dealers, we have taken temporary block closures.”
Sales of overall commercial vehicles fell by 23% to 262,773 units in FY21. Tata Motors recorded a 42.4% market share, the lowest in the last four years.
The company is expediting cost reduction efforts in Q1. It is also deferring capital expenditure and will avoid it to an extent, it said in an investors presentation.
Outlook
The company is expecting the demand situation to continue to improve over the year. However, supply disruptions continue to trouble along with rising steel prices. It further expects the performance to improve progressively as the supply chain and COVID situation improves.
In commercial vehicles, the focus remains on growing market share and protecting margins amidst this dynamic environment, while in passenger vehicles, the company will continue to enhance the sales momentum by leveraging its front end. In electric vehicles, the company will drive up penetration through portfolio expansion and accelerating charging infrastructure.