Tata Motors Reports Global Demand Softness, Anticipates Gradual Improvement In Domestic Market
Passenger vehicle industry retail sales witnessed decline for two consecutive months -- May and June, this fiscal.
Tata Motors Ltd. expects demand to remain sluggish in overseas markets this fiscal while pinning hopes on a gradual bounce back in the domestic market on the back of new launches and the upcoming festive season.
Earlier this month, the Mumbai-based automaker reported a consolidated net profit of Rs 5,566 crore and total income of Rs 1,09,623 crore for June quarter.
"Overall, from a demand perspective, we do anticipate that as far as the global demand is concerned, it is likely to remain muted. It has been that way. It's likely to remain muted. No immediate changes there," Tata Motors Global Chief Financial Officer PB Balaji said in an analyst call.
In the domestic market, the company expects a gradual improvement in demand during the rest of the year aided by government plans to invest on infrastructure, healthy monsoons, favourable overall economic macros, new launches and upcoming festive period, he noted.
"So there is a need for absolute reason why there is an optimism as far as the domestic demand buildup is concerned, how gradual it's going to be, we will have to wait and see," Balaji said.
He noted that commodities are also likely to remain range bound and therefore, in this situation, the automaker is confident of sustaining the performance in the coming quarters, and delivering a strong year.
"So financials wise, this business is on a strong wicket and is likely to remain that way in the coming quarters and the full year as well," Balaji said.
Passenger vehicle industry retail sales witnessed decline for two consecutive months -- May and June, this fiscal. Tata Motors Passenger Vehicles MD Shailesh Chandra cited high channel inventory as a notable challenge.
"We have an all-time high channel inventory with further buildup which happened in the first quarter, which did add stress on the wholesales. Also, there has been moderation in the EV fleet segment demand due to the expiry of FAME II in March 2024," he stated.
Outlining the company's strategy, Chandra said, "As far as we are concerned, in terms of actions, we focus on retail acceleration backed by effective marketing campaigns, micro market focus, targeted product interventions, which are going to come in the coming months."
"There are new upcoming launches primarily to drive customer excitement and of course, it is also going to help the company improve footfalls in the showroom," he added.
He also highlighted the company's focus on cost reduction.
"We will continue the rigor on tight control on fixed cost and continued effort on structural cost reduction within the organization," Chandra said.
Tata Motors' current dealer inventory would be 35-40 days, he stated.
"In terms of normalised inventory, typically, we target about 30 days, so it is on a higher side," he added.
Chandra noted that inquiries remained firm in May and June despite dip in retail sales. This pretty much indicates that in the coming months the retail sales are going to make a comeback.
"It was customers who are taking slightly more time in terms of converting to retail and we did see some level of bounce back in July. And we expect that in the upcoming festive season, the demand growth is going to come," Chandra said.
Industry body Federation of Automobile Dealers Associations recently highlighted that high inventory levels were affecting the business of automobile dealers. According to FADA, the vehicle inventory level has surged to a historic high of 67-72 days equating to Rs 73,000 crore worth of stock.
