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Tata Motors’ consolidated loss of ₹9,864 crore for the quarter ended March 2020 could have been lower but for a few exceptional items such as impairment and employee separation costs. Together, all the exception items add up to about ₹2,800 crore, leaving the consolidated loss (before tax and exceptional items) for the quarter at ₹6,512 crore.
That is still a huge blow and both the India operations and Jaguar Land Rover (JLR) have been responsible for the weak show. While the domestic business was making losses even before the Covid-19 outbreak, the pandemic has cut short the nascent return to profitability seen in JLR in the quarters ended September 2019 and December 2019.
Although other geographies such as the US, the UK and Europe witnessed poor growth in retail sales, steps taken by JLR in China, such as resetting inventory levels, redrawing its engagement with retailers and simplifying its incentive programmes partly helped JLR’s return to profitability during the above-mentioned periods.
China brings in about 20 per cent of JLR’s total retail volumes. Besides, ‘Project Charge’, directed at achieving cost savings of £2.5 billion by 2019-20, also played its part. JLR exceeded this target by achieving £2.9 billion of savings even by the December 2019 quarter.
However, this turnaround has been short-lived. With global sales volumes down 31 per cent year-on-year, JLR clocked a 24 per cent fall in revenues to £5,426 million (₹51,550 crore approximately) and loss (before tax and exceptional items) of £494 million (₹4,700 crore approx) for Q4. JLR’s EBITDA margins came at 4.6 per cent, about 500 basis points lower than the March 2019 quarter.
JLR restarted production in its China joint venture in early-March and in most other sites (the UK, Slovakia, Austria, Brazil, India) beginning May 18. About 89 per cent of JLR’s retail network is operational now and the company is seeing encouraging signs in China, Europe and the US. But with personal vehicles being discretionary items, the threat of a prolonged slowdown in vehicle sales across the globe looming large, volumes may not recover in a hurry.
On its part, the company is betting on the new Defender 110 (which has seen order inflows of over 22000 vehicles), the new Evoque and new Discovery Sport, apart from a £5 billion savings target under Project Charge for FY21 as well as reduction in capital expenditure.
Domestic business
On the domestic front, the onset of Covid-19 at a time when the industry was already in a downturn, saw sales volumes plunge 47 per cent over the March 2019 quarter. The company’s standalone revenues dropped 48 per cent to ₹9,733 crore and losses (before tax and exceptional items) to ₹2,215 crore. The India business was loss-making even at the operating level. While there is some demand for tippers currently, the company does not expect the haulage segment to recover anytime soon, thanks to the higher axle load norms which have improved the carrying capacity of existing trucks.
On the passenger vehicle business which it plans to hive off into a separate subsidiary, the company is actively scouting for a partner. The company has just 5 per cent volume market share in PVs (including cars, utility vehicles and vans), having never been able to beat competition from the likes of Maruti Suzuki or Hyundai. The 5 per cent share now is less than half the 12.4 per cent share it had a decade ago.
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