Tata Motors Is Cautious On Near-Term Outlook After Weak Q2 Results

Tata Motors Ltd. is cautious on near-term demand after earnings fell in July-September 2024 due to a decline in sales of cars and trucks alike.

Consolidated net profit of the Mumbai-based automaker fell 10% over the year-ago period to Rs 3,450 crore in the quarter ended 30 September, even as revenue decreased 3.5% to Rs 1.01 lakh crore, according to an exchange filing on Friday. Analysts polled by Bloomberg estimated the top line at Rs 1,03,005 crore and the bottom line at Rs 4,805 crore.

• Revenue down 3.5% at Rs 1.01 lakh crore (Estimate: Rs 1,03,005 crore)

• Ebitda down 14.2% at Rs 11,736 crore (Estimate: Rs 14,636 crore)

• Margin down 140 basis points at 11.6% (Estimate: 14.20%)

• Net profit down 10% at Rs 3,450 crore (Estimate: Rs 4,805 crore)

• Net automotive debt at Rs 22,000 crore

One basis point is one-hundredth of a percentage point.

“Growth in the second quarter was impacted due to significant external challenges…,” PB Balaji, group chief financial officer at Tata Motors, said in a statement. “As the supply challenges ease and demand picks up, we are confident of steady improvement in our performance and delivering a strong H2 FY25.”

The quarterly performance came on the back of a decline in sales—for passenger cars and cargo trucks in India and luxury cars globally. Even the electric mobility business suffered.

JLR remained profitable for the eighth straight quarter, albeit at a decline.

The Range Rover maker saw its profit before tax decline 9.95% year-on-year to £398 million on the back of revenue that fell 5.6% to £6.5 billion. The EBITDA margin shrank 320 bps to 11.7%. The profitability took a beating due to constrained production stemming from a lack of aluminium and lower wholesales.

Still, JLR has retained its full-year revenue guidance of £30 billion with a profitability margin of 8.5% or above. That, on the back of pending orders.

“Our teams responded brilliantly to the aluminium supply shortages, so we could deliver as many orders as possible to our clients,” Adrian Mardell, chief executive officer at JLR, said in a statement. “With strong global demand for our cars, we are well-positioned to deliver on our commitments again this financial year.”

As on 30 September, JLR had a net debt of £1.2 billion with a cash balance of £3.4 billion.

Revenue of Tata Motors’ car business in India declined 3.9% year-on-year to Rs 11,700 crore and operational profitability shrank 30 bps to 6.2%. That was largely due to a decline in sales—down 6.1% year-on-year at 1,30,500 units—as slowing demand and seasonal factors took their toll. 

In the six months through 30 September, Tata Motors enjoyed a VAHAN market share of 13.3%. One in three Tata Motors cars now has either an EV or CNG powertrain.

The festive boost—at 68,500 units, Tata Motors clocked its highest ever monthly retails in October 2024—is a good start to the second half of the fiscal, but the company still cautioned on the demand scenario over the next six months.

“We moderated our offtakes in Q2 to keep our channel inventory in check,” said Shailesh Chandra, managing director at Tata Motors PV, in a statement. “Our multi-powertrain suite of Curvv and Nexon has garnered strong consumer interest as we continue to ramp up deliveries in Q3.”

The festive season has reduced Tata Motors’ inventory by 25,000 units to 33 days of unsold stock, which the company said was “normal”. A dealers lobby recommends inventory at 21 days.

Sales of Tata Motors’ trucks and buses declined by nearly a fifth from the year-ago period to 79,800 units, mainly due to slowdown in infrastructure projects, reduction in mining activity and drop in fleet offtake during the heavier-than-normal monsoons.

Consequently, revenue fell 13.9% year-on-year to Rs 17,300 crore. EBITDA margin improved 40 bps to 10.8% due to savings on commodity costs.

“Our demand-pull strategy and vigilance on costs had the business deliver EBITDA margins of 11.2% in H1 FY25,” Girish Wagh, executive director at Tata Motors, said in a statement. “Going forward, with the rains easing, increased infrastructure spending, and festive season boosting consumption, we anticipate demand to pick up.”