Automobile sales in the domestic market have hit speed bumps over the last 2-3 quarters and home grown Tata Motors expects demand to remain slow in the coming months, before some pre-buying in the wake of upcoming BS-VI emission norms is expected to lift the market in the second half of the current financial year.
"We see challenging market conditions right through the space. Particularly in India, where we expect next 3-6 months to be tepid demand," P. Balaji, CFO of Tata Motors told reporters on Monday.
Rising cost of ownership in the wake of higher insurance premiums and new safety norms, apart from a rural distress has hurt passenger vehicle demand. Commercial vehicle sales too have hit the slow lane due to revised axle load norms. Also, liquidity crunch faced by a few non-banking finance companies impacted credit availability, which too hurt demand.
According to the Society of Indian Automobile Manufacturers, passenger vehicle sales tumbled 17 per cent in April, its steepest fall in almost 8 years. Sales of trucks and buses too declined 6 per cent last month.
"The larger casualty (in commercial vehicles) was the medium and heavy CVs. The MHCV segment on a year-on-year basis has actually degrown from November. Some of the key reasons are the increased axle load norms...This year, the slowdown continues in MHCV. Manufacturing output is slowing down, consumption is slowing down and off-late execution of infrastructure projects has also slowed down," said Girish Wagh, head of CV business unit at Tata Motors.
Meanwhile, in the Jaguar Land Rover business, the company is hoping for a turnaround in China, one of its largest market. Over the last several months, the company has undergone a restructuring to turnaround the business, and efforts are bearing fruit, said Balaji.
JLR had announced Project Charge, aimed at saving £2.5 billion by March 2020, by way of investments, working capital and cost savings. Balaji said, savings of £1.3 billion have already been achieved.
"We are well ahead of plan as far as the capex and working capital piece is concerned. On the cost side, we had about 4,500 people restructured, 2,600 of them have left at the end of March. You should see the savings coming through in the coming part of the year," he said.
In China, the company has taken several corrective actions to turnaround operations. For instance, it has reduced significant inventory in the market. In the second half of the year, the new Evoque SUV will be launched in China. That coupled with a low base effect coming into play, should help JLR China market coming "back to growth in a quarter from now," added Balaji.
JLR's capex this year ending March 2020 is expected to be around £4 billion.
On a consolidated basis, Tata Motors reported a net profit of Rs 1,109 crore in the January-March quarter, down 49 per cent from a year ago. Revenue in the fourth quarter stood at Rs 86,422 crore, down 4 per cent.
