Companies

FY21 among the most challenging year to date: Tata Motors’ N Chandrasekaran

Ayushi Kar Mumbai | Updated on July 30, 2021

N Chandrasekaran, Chairman   -  PAUL NORONHA

A year marked by muted consumer demand, disruption in production, supply chain and retail networks

With muted consumer demand and disruption in production, supply chain, and retail networks, fiscal year 2020-21 has been amongst the most challenging to date, according to N Chandrasekaran, Chairman of Tata Motors.

“As the impact of the pandemic recedes globally with more people getting vaccinated, we expect demand to remain strong with consumer preferences shifting further towards personal mobility. The supply situation however is expected to be adversely impacted for the next few months due to disruptions from Covid-19 lockdowns in India and semi-conductor shortages worldwide for the auto industry globally which will take time to work through. This will impact production volumes, sales, cash flows and margins,” Chandrasekaran said at the Tata Motors Annual General Meeting on Friday.

“We expect the situation will start to improve in the second half of FY22 even as the broader underlying structural capacity issues resolve with new capacities coming online over the next 12-18 months. Some level of shortages will therefore continue through to the end of the year and beyond,” he added.

Decline in volumes

Tata Motors saw an overall decline in volumes by 10.3 per cent to 903,000 units, and a decline in revenue of 4 per cent to ₹2.5 lakh crore during FY21. Despite an overall industry contraction of 6.1 per cent, India business grew by 2 per cent in volumes and 7 per cent by revenues led by the PV segment. Tata Motors improved its EBIT margins by 260 bps to ₹6471 crore, while its India business improved its EBIT margin by 370 bps.

In India business, PVs recorded the highest annual sales in eight years, with its market share now touching double digits. This Chandrasekaran attributes to a preference for personal mobility and the rising popularity of their ‘New Forever’ range of cars and suvs. PV volumes also grew by 69 per cent. EV business has also been especially noteworthy, where Tata Motors now enjoy a market share of 71.4 per cent in India, with sales of over 4000 Nexon EVs since their launch, and volumes here growing by 218 per cent, he said.

Commercial vehicles (CV) volumes dropped by 23.4 per cent this year, although Chandrasekaran says that Tata Motors did post a sequential quarter-on-quarter growth due to improved consumer segment, e commerce boost, firming freight rates, and higher infrastructure demand. Medium and Heavy CVs and intermediate and light CVs remain Tata Motors’ best hope, improving market share in comparison with FY18 (+410bps for MHCVs from FY18, +90bps for ILCVs, from FY18). Market share for the small commercial vehicles declined to 37.5 per cent, from 40 per cent in FY18.

For Jaguar LandRover, while retail sales have declined globally by 14 per cent, China has seen a 23 per cent growth. There was an overall 14 per cent drop in revenue to £19.7 billion. The business, however, improved its EBIT margins by 250 bps to 2.6 per cent and generated positive free cash flows of £185 million.

Published on July 30, 2021

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