Tata Motors PV reported a 79% year-on-year (y-o-y) fall in consolidated profit to ₹859 crore in the April-June quarter, its third consecutive quarterly decline since demerging from the commercial vehicle business, as weak performance at its British subsidiary — luxury carmaker Jaguar Land Rover (JLR) — and higher raw-material costs offset strong growth in its India passenger-vehicle business.
Consolidated revenue grew 9% to ₹95,799 crore, while the India passenger-vehicle business reported a 65% increase in revenue to ₹17,930 crore and turned profitable before tax and exceptional items.
The steep fall in profits reflected JLR’s 74% y-o-y fall in profit after tax to £66 million, while operating profit margins declined 120 basis points (bps) to 2.8%. A hundred bps equals 1%. The revenue of the British brand fell 10% to £6 billion, which came after it reported a 9% fall in wholesale sales to 87,300 units.
The 79% decline in Tata Motors PV's profit was primarily due to weak performance at its Jaguar Land Rover (JLR) subsidiary and rising raw material costs, which offset growth in its India passenger-vehicle business.
Jaguar Land Rover's revenue dropped due to a 10% decline in wholesale sales, impacted by temporary supply constraints and the planned wind-down of outgoing Jaguar models, alongside market disruptions linked to geopolitical conflicts.
Tata Motors' India passenger-vehicle business saw a 65% increase in revenue, achieving profitability before tax, largely driven by a strong demand for electric vehicles and a 46% rise in sales volume.
Yes, investors should be cautious as the ongoing geopolitical tensions are affecting commodity prices and could impact Tata Motors' profitability, particularly in its JLR segment.
Tata Motors is focusing on aggressive cost reduction efforts, expediting production-linked incentive accruals, and implementing calibrated pricing actions to enhance profitability amidst rising costs.
The operating profit margin for the first quarter is below the guidance of the British company of 4% for the entire financial year, indicating a challenge to recover profitability in the upcoming quarters to meet its projections to investors.
“JLR delivered first-quarter profits (before tax) of £109 million and an adjusted EBIT (earnings before interest and tax) margin of 2.8%. Despite the near-term industry challenges, we continue to see strong demand for our brands and look forward to the launch of four sensational new products in the coming months: Range Rover Electric, Range Rover Sport Electric, Range Rover GT and Jaguar Type 01,” JLR chief executive P.B. Balaji said in a company statement.
During a virtual media briefing on Thursday evening, Richard Molyneux, JLR’s chief financial officer, said the company faced several market and supply challenges in Q1 that impacted both wholesales and revenue. “But despite this, we still delivered a profit consistent with our four-year guidance, which does demonstrate the resilience of both our brands and our business,” Molyneux said.
The bright spot was the India passenger-vehicle business, which continued to gain momentum even as JLR weighed on the consolidated numbers.
Profit before tax and before exceptional items stood at ₹11 crore compared to a loss before tax of ₹123 crore in the year ago period. The net profit numbers for the India business were not available.
Among passenger vehicle makers, Mahindra & Mahindra has seen a jump in profits while both Maruti Suzuki and Hyundai Motor have recorded declines.
The growth in Tata Motors PV’s India business came on the back of a 46% jump in sales to 182,300 units, driven by GST cuts and strong demand for electric vehicles, a segment where the company has more than a third of the country’s EV market share.