Tata Motors Speeds Up Plans Amid Margin and Market Share Challenges

Mumbai: Tata Motors Ltd has set an ambitious plan for the coming years, aiming to increase its market share with new vehicle launches and a focus on electric vehicles (EVs). However, growing competition and pressure on profit margins could pose challenges.

Expanding in Passenger Vehicles

In the domestic passenger vehicles (PV) sector, Tata Motors plans to launch 5-6 new models over the next two years, starting with the Curvv in FY25. This includes four new EVs. The company predicts India’s PV market will grow to 6 million units by FY30, a 6% annual growth rate.

At a recent investor event, Tata Motors announced plans to expand its market reach from 53% to 80% by introducing new car models and different powertrain options like EVs and compressed natural gas (CNG). They aim to increase their market share from 14% now to 16% by FY27 and up to 20% by FY30.

The company also provided an update on the split of its commercial vehicle (CV) and PV business. The plan will soon be presented to the board for approval.

Focus on Electric Vehicles

Tata Motors is heavily focused on the EV market, where it currently holds over 70% market share. They aim to keep their leadership and achieve 30% EV penetration in their portfolio by FY30. The company expects to break even on earnings before interest, taxes, depreciation, and amortisation (EBITDA) by FY26 due to lower battery costs and increased economies of scale.

However, executing these plans might be challenging. Competitors are also launching new EVs, making it difficult for Tata Motors to maintain its lead. Their EV market share dropped from 87% in FY22 to 73% in FY24.

Competition and Margin Pressures

Tata Motors acknowledged increased competition in the overall PV market. They aim to achieve over 10% EBITDA margin for their PV and EV business in the medium term, driven by a better product mix and higher operating efficiency. However, maintaining high margins across the company could be difficult due to its luxury brand Jaguar Land Rover (JLR), which made up about 70% of Tata Motors’ revenue in FY24.

According to a report by Motilal Oswal Financial Services, JLR’s margins are expected to stay stable over FY24-26 despite cost pressures and investments in EVs, which might lower margins. Both the CV and PV businesses in India are experiencing slower demand, which could affect future performance.

Growth in Commercial Vehicles

In the domestic CV market, Tata Motors expects volumes to grow at a 4-5% annual rate from FY24-29, supported by strong GDP growth, government infrastructure projects, and the vehicle scrappage policy.

Targeting High Margins and Cash Flow

Overall, Tata Motors is aiming for strong double-digit margins and healthy free cash flow. Analysts at Elara Capital are optimistic about Tata Motors’ EV portfolio, noting its appeal to new and diverse customers. They are waiting for more details on JLR’s strategy at an upcoming analyst meeting.

Despite the positive outlook, some analysts believe the recent strong performance of Tata Motors’ stock (up 74% in the past year) might limit further significant gains in the near term.