The turnaround that Tata Motors began over a year ago, especially in the domestic market, will continue in the year ahead, its MD and CEO and Guenter Butschek said on Wednesday. The company remains optimistic on demand in the domestic market, but there are continued headwinds for its luxury Jaguar Land Rover unit, particularly in its home market of the UK.
Tata Motors' fourth quarter consolidated net profit halved year-on-year to Rs 2,176 crore, much lower than analysts' expectation of Rs 3,840 crore, according to a Reuters poll. The earnings were impacted due to higher expenses and a one-time impairment charge for product development programmes.
Consolidated revenue for the quarter rose 18 per cent to Rs 91,279 crore.
“The turnaround is not over yet, not till the time we have sustainably fixed our market position in terms of market share, but also financial bottomline. Taking you back to the last year, I had referred to the turnaround as a short-term phase of 6-9 months...We have no option but to continue our best efforts in the form of turnaround 2.0 to structurally improve the business,” said Butschek.
He particularly talked of the standalone passenger vehicle business, where the company has started to grow ahead of the market due to the new launches, and which he says must be built as a self-sustainable unit for the future.
As a part of its continued turnaround focus, the company will look to sell-off non-core assets, while also cut back on investments in areas, which it doesn't see a scale in the near future.
Tata Motors, for instance, has stopped the production of its aged Tata Indica hatchback and the Indigo Sedan and it has also planned to exit its JV with Hitachi for construction equipment. The company has also streamlined its backend supply chain.
Aided by the new launches across passenger and commercial vehicles, Tata Motors' domestic wholesales in the January-March quarter rose 34 per cent year-on-year to 201,573 units. But, no celebrations just yet.
“We have to win decisively in commercial vehicles, win sustainably in passenger vehicles and embed the turnaround culture as far as the business is concerned. After many years, we have arrested the market share bleed and we need to win decisively going forward,” said P. Balaji, CFO.
The continued focus on turnaround in the domestic business comes at a time headwinds abound for JLR, which saw total retail sales in the fourth quarter decline 3.8 per cent.
“While China and India continue to shine, there are challenging markets across the board. The US continues to face market cyclicality, but the area where we continue to see significant challenges is the UK; be it Brexit, taxation of diesel vehicles, visa uncertainty as well as market cyclicality,” said Balaji.
Looking ahead, Tata Motors sees challenges continuing in the global market, particularly in the UK in the wake of the Brexit uncertainty. In the domestic market, while the company remains optimistic about continued strong demand in both passenger as well as commercial vehicles, Balaji raised concerns over the rising inflation and interest rates, which many analysts expect to go up this year.
Tata Motors shares ended up 0.5 per cent at Rs 309.25 on Wednesday. The results were announced after markets closed.