Tata Motors Posts Mixed Q2 FY25 Results Amid Supply Challenges & Market Volatility

Abhijeet Singh
08 Nov 2024
06:03 PM
3 Min Read

Jaguar Land Rover weighs on performance while domestic segments show resilience.


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Tata Motors Ltd (TML) announced its financial results for the second quarter of FY25 showing a challenging quarter due to external constraints that impacted growth across segments. The company reported consolidated revenues of INR 101,450 crore, a 3.5% decline from the previous year, while maintaining an EBITDA margin of 11.4% and an EBIT margin of 5.6%. Profit before tax (PBT) for Q2 stood at INR 5,768 crore, a decrease of INR 391 crore year-over-year primarily attributed to supply chain issues affecting key operations, including Jaguar Land Rover (JLR).

In a difficult quarter for the automotive industry, Tata Motors faced headwinds with constraints in production capacity and reduced demand. Group CFO PB Balaji emphasised that while these disruptions affected quarterly performance, Tata Motors remains optimistic about achieving improved performance in the second half of the year as supply issues ease. He reiterated the company’s focus on “driving growth, competitiveness, and free cash flows” to stabilise performance going forward.

Jaguar Land Rover Impacted by Supply Chain Issues, Maintains Annual Guidance

Jaguar Land Rover (JLR) experienced a revenue dip of 5.6% to £6.5 billion in Q2, impacted by aluminium supply shortages and quality control holds on nearly 6,000 vehicles. This setback affected JLR’s EBITDA margin, which slipped to 11.7%, down 320 basis points year-over-year. Despite these constraints, JLR management remains positive about the second half of FY25, holding firm to their annual revenue guidance of £30 billion with an EBIT margin of at least 8.5% and a net cash position.

CEO Adrian Mardell highlighted that JLR has continued to see strong demand for key models, including over 48,000 pre-orders for the new Range Rover Electric and 2,900 orders for the premium Defender OCTA, priced at £145,000. Investment in the Halewood plant for electric vehicle (EV) production has now reached £250 million, positioning JLR favourably for future growth as demand for luxury EVs rises globally. The easing of supply issues is expected to enhance production and meet strong order books in the latter half of FY25.

Commercial Vehicles Segment Weathers Market Decline with Resilient Margins

The Tata Commercial Vehicles (CV) segment reported a 13.9% decline in revenue to INR 17,288 crore, reflecting the impact of a broader market slowdown and adverse weather conditions that hampered infrastructure projects and mining activities. While unit volumes in domestic CV sales dropped by 19.6%, EBITDA margin improved by 40 basis points to 10.8%, driven by cost optimisation and favourable pricing strategies. For the first half of FY25, the CV business achieved an 11.2% EBITDA margin, with signs pointing to a gradual recovery in demand as infrastructure activity rebounds following the monsoon season.

Girish Wagh, Executive Director, Tata Motors, noted that the festive season and anticipated increases in infrastructure spending could help stimulate demand, particularly for intermediate and light commercial vehicles in the upcoming quarter. However, he expressed caution over the short-term domestic demand scenario.

Passenger Vehicles Continue to Lead in EV Market but Face Demand Pressures

In the Passenger Vehicle (PV) segment, Tata Motors posted revenues of INR 11,700 crore, a year-on-year decline of 3.9%, with EBITDA margins holding steady at 6.2%. Notably, Tata Motors retained its leading position in the domestic electric vehicle market with a 65% market share, despite the industry’s overall 5% drop in registrations for the quarter. The recently launched Tata Curvv and Curvv.ev, which received positive consumer response, are expected to drive future demand. In addition, the Nexon EV model and other EV variants have sustained strong interest, supporting Tata’s multi-powertrain strategy across electric, CNG, and internal combustion engine vehicles.

Shailesh Chandra, Managing Director, Tata Motors, noted on the rise in EV sales, attributing growth to Tata’s expansive product portfolio and strategic model launches in line with shifting market demands. However, the company remains vigilant as it navigates an increasingly competitive landscape and the impact of policy changes on EV incentives.

Optimism For H2 FY25 As Tata Motors Aims for Net Debt-Free Status

Looking ahead Tata Motors anticipates an improvement in the second half of FY25, buoyed by seasonal demand, easing supply constraints, and continued infrastructure investments. The festive season is expected to further boost domestic sales, while JLR’s production is projected to stabilise, helping meet pent-up demand. Tata Motors aims to achieve a net debt-free position by the end of FY25, as projected by PB Balaji.

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