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Tata Motors reports surprise March quarter loss; semi-conductor shortage, COVID to impact Q1

On the Jaguar Land Rover front, however, it is seeing a pickup in demand

tata-motors-reuters [File] Representative image | Reuters

Tata Motors expects near-term challenges as it battles a semi-conductor shortage that has hit the automobile industry hard, and a second wave of COVID-19 that has led to lockdowns and restrictions in various states in India. On the Jaguar Land Rover (JLR) front, however, it is seeing a pickup in demand in key markets like China and North America, and as vaccinations pick up pace and economies open, demand is seen picking up in UK and Europe as well.

“As the percentage of vaccination is beginning to improve, we are seeing demand also improve. We are seeing improved demand scenario everywhere. The concern is of supply. We do expect challenges in Q1 (April-June) due to the semi-conductor issue. Demand wise, we see no concern with respect to JLR,” P.B. Balaji, CFO of Tata Motors said in a post earnings conference call.

The company has planned a capital expenditure of GBP 2.5 to 3.0 billion per year at JLR over the next few years. In its domestic business, it plans a capex of Rs 3,000-3,500 crore in the current financial year.

Tata Motors has seen strong traction in the domestic passenger vehicle business over the last year, aided by several new launches like the Nexon EV and the Safari SUV. It now has a market share of 8.2 per cent in the domestic passenger vehicle industry. While there is likely to be some pressure in the April-June quarter, due to the COVID-related restrictions in many states, the company expects a strong pickup in demand in the PV segment.

“We do expect a very strong bounceback. The customer is clearly shifting gears and we are seeing a significant shift in personal mobility. Our order pipeline is very strong,” said Balaji.

However, there is expected to be a stress in the commercial vehicle business as there are near-term challenges on market demand, freight rates as well as financing. Therefore, the company has rationalised CV production, added Balaji.

Automobile companies are also facing challenges from rising input costs. Prices, particularly of steel and aluminum have risen sharply over the last few months, forcing companies to raise prices. Tata Motors will calibrate price increases in the first half, Balaji said. The semi-conductor crunch faced by the industry is also likely to have an impact in the first quarter.

Tata Motors’ fourth quarter consolidated revenue jumped 42 per cent from a year ago, but the owner of Jaguar Land Rover reported a surprise net loss on the back of asset writedowns in the luxury passenger vehicle unit.

The Mumbai-based company reported a net loss of Rs 7,605 crore in the March 2021 quarter, compared with a net loss of Rs 9,894 crore in the corresponding quarter a year ago.

Its quarterly revenue stood at Rs 88,628 crore, versus Rs 62,493 crore in the year ago quarter.

In February this year, JLR had announced a new ‘reimagine’ strategy that lays a big focus on electric vehicles. It also aims for double digit EBIT (earnings before interest, taxes) margins by 2025-26. The new strategy also meant that the company would no longer proceed with certain investments already made. This entailed GBP 1.5 billion in exceptional charges in the fourth quarter, including GBP 952 million of non-cash writedowns of prior investments and GBP 534 million in restructuring charges, is expected to be paid in the current financial year ending March 2022.

In the domestic market, Tata Motors reported a standalone revenue of Rs 20,046 crore in the March quarter, compared with a revenue of Rs 9,733 crore a year ago. Its standalone net profit stood at Rs 1,646 crore, versus a net loss of Rs 4,871 crore in the year ago quarter. In the standalone business, the company benefited from a one-time gain of Rs 1,182 crore related to reversal of impairments it had made at the end of the previous financial year in the passenger vehicle business.

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