Tata Motors – EV Play or Debt Reduction Play?

A Leading Automobile Co. with #1 in Commercial Vehicle and #3 in Passenger Vehicle (Incl. EV)

From Failure to reaching Luxury: The Iconic Transformation of Indica by the Group Company, Making Land Rover a World-renowned Luxury Brand.

Welcome, readers! Today, we will Study about Tata Motors, a renowned company under the Tata Group.

While, Many of are already familiar, Despite that we’ll dive deeper into the remarkable journey of Tata Motors and check out its Past and future Prospectus. So Let’s Begin.

(A) History

As, Its History plots huge Milestone because Tata Motors was established in 1945 as Tata Engineering and Locomotive Co. Ltd. (TELCO). Initially, the company focused on manufacturing locomotives and heavy machinery.

Tata Motors Ltd - TELCO PA Wealth

Furthermore, in 1954, Tata Motors ventured into the automotive industry by producing its first commercial vehicle – Tata Mercedes-Benz 312, in collaboration with Daimler-Benz AG. Later on, This marked the beginning of Tata Motors’ journey in becoming a prominent player in the Indian and global automotive market.

(A) About

Tata Motors Ltd - PA Wealth

Today, Tata Motors Ltd is a leading Indian multinational automotive manufacturing company. Basically, The company produces a wide range of vehicles, including cars, SUVs, trucks, buses, and military vehicles. In Addition, company is committed to innovation, quality, and customer satisfaction.

Infact, Tata Motors has a strong presence in both domestically and internationally. In India, it offers a diverse portfolio of passenger vehicles, including popular models like the Tata Tiago, Tata Nexon, and Tata Harrier.

None the less, It also caters to the commercial vehicle segment with robust and reliable trucks like the Tata Prima and buses such as the Tata Marcopolo. Whereas, on International front Tata Motors has expanded its footprint to several countries, including the United Kingdom, South Korea, Thailand, and South Africa.

In Contrast Today Tata Motors (TAMO) recognized for its competitive offerings in the global market and has established partnerships with renowned automotive brands.

(C) Journey

Tata Motors Ltd - Milestone, Journey, Achievements PA Wealth

(D) Shareholding Pattern

Tata Motors Ltd -  Shareholding pattern PA Wealth
Tata Motors Ltd - Shareholding pattern Public Promoters Rakesh Jhunjhunwala PA Wealth

(E) Board/Executive Members

(F) Business Classification

Tata Motors Ltd - Business Classification Business Verticals Business Segment PA Wealth

In the Indian automotive space, TML is the only company which has presence across all the verticals of 4W and CV space. At one end it has a global luxury 4W portfolio of JLR and mass & mid-segment TATA cars in India, while at the other end TML is a market leader in the Indian CV space.

(G) Vertical Bifurcation

The company has mainly 4 Verticals –

  • EV – Sale of EV Segmented Cars
  • PV – Sale of Passengers Related Cars like Tigao, Tigor, safari
  • CV – Sales Heavy Vehicles liek Buses, Trucks, Mini Trucks, Pickup Vans and So on.
  • JLR – Sales of Luxurious Cars such as Jaguar, Range Rover, Defender and so many more.

(H) Revenue Classification

i. Sales Mix – JLR’s Brand Wise (in Units)

Tata Motors Ltd - JLR Brand Wise JLR sales Mix PA Wealth

(I) Market Share

Tata Motors Ltd - revenue Mix By Geography, Region Wise, Wealth

Automobiles Type

As you can see, in Passenger vehicle (PV) – EV Space, company is already leading with ~84% market share, whereas in PV (Non EV) Company has grew its market share from 11.40% to 13.50% because to +ve response from the designs and Launches.

However, In Commercial vehicle space company is still leading, but in FY23 its Market share dropped by 3

(J) Expense as % of Net Sales

Tata Motors Ltd - Total Expenses. Expenses as % of Sales

(K) Operational Facilities

Tata Motors Ltd - Operational Facilities, Manufacturing facilities, Plants, R&D Centers PA wealth

Tata Motors has total of 25 operational facilities around the world. In which 12 are specifically for JLR and rest are for Tata Motors.

Despite having these Manufacturing facilities, Tata Motors has also acquired Ford Sanand Plant, reflecting more Capacity to meet future demand.

(L) Financial Health (10 Years)

Tata Motors Ltd - Financial Health, Financial Trend PA Wealth Sales
  • Tata Motors (TAMO) Sales Compounded with just 4.54% in last 10 Years. Indicating very Mediocre sales growth.
  • Shockingly, on PAT front company has delivered -18.04% of degrowth.
  • Furthermore, on FCF side, company has reported 54,518 cr of FCF which is likely to be used in reducing Debt Burden.

DU Pont Analysis (10 Years)

Tata Motors Ltd - DU Pont Analysis  ROE PATM Asset Turnover PA Wealth

(M) Management And Concall Highlights

(i) Performance and Outlook

  • Company has acquired the Ford’s Sanand Manufacturing Facility.
  • Company has also received the Final Tranches of RS 3750 Cr from Strategic company – TPG Rise.
  • JLR’s Working Capital is favorable. Infact, Company has reported £2Bn after making Investments.
  • Management shared that, Co will Introduce a series of Launches by the end of 2026
  • JLR Verticals likely to report 6% EBIT. Net Debt will reduced from £3Bn to £1Bn.
  • Company has endup with Total Investments iof Rs 6400 cr, Which is likely to Extend to Rs 8000cr (Into Electrification Variants)
  • Semiconductor chip supply is expected to improve going forward due to reduction in Commodity Prices.

(ii) Q4FY23-Concall

Commercial Vehicle –

  • Company has report 34% Growth, mainly Due to better Volumes, Revenue Mix, Cost Savings.
  • Non-Vehicle (Spare Part & Services) grew 33%
  • Company has introduced 40 New Products + 150 Variants.
  • Company has Completed all E-Buses deliveries to DTC and Nagpur city in FY23

Passenger vehicle

  • PV (Non-EV) Grew 150%, and PV (EV) Grew 45%.
  • Reported 85% Market share in the EV Segment of Passenger Vehicle Vertical
  • Company has reported 6.4% EBITDA but likely to achieve 10%.
  • For FY23, Tata Motors become #1 for SUV Producer by the Launch of Nexon
  • New launch to drive demand : a) Nexon EV Max #Dark with new features, b) Altroz iCNG with twin cylinder tech and c) Mid-cycle enhancement.

JLR

  • JLR Business Grew 9% YoY, backed by improvement in supply of the specialized chips from a specific supplier. Infact, Co Expect Improvement will remain to continue.
  • Order book remained strong at 2,00,000 units despite increased retail sales. Range Rover, Range Rover Sport and Defender constitutes ~76% of the total book.
  • Electrification of Models likely to Retain the growth Ahead.
  • Company has guided that its Debt will not reduced by this year also, instead its debt may reduce it by FY25.

(N) Strength and Weakness

Strength

  1. The company owns brands like Jaguar and Land Rover, offering diverse vehicles for various markets.
  2. Tata Motors aims to deliver future-ready vehicles, exploring new mobility avenues and meeting customer demands.
  3. Tata Motors’s strategic partnerships helps them to enhance technology and accelerate EV adoption.

Weakness

  1. Tata Motors’ net debt levels increased due to supply chain constraints but are expected to reduce through increased volumes and divestment of non-core assets.
  2. JLR faces stiff competition from other established luxury car OEMs; sizeable investment requirement towards evolving technology and regulatory compliance
  3. Tata Motors is vulnerable to currency fluctuations due to exports, imports, and foreign currency debt.

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References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry Publications.

Disclaimer: The report only represents the personal opinions and views of the author. No part of the report should be considered a recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated.

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