Rates, costs flatten Tata Motors net

Rising interest rates and increasing commodity prices tamped down any possibility of Tata Motors reporting a stellar growth in profits despite consolidated revenues rising a whopping 24% during the quarter.

Consolidated net profit came in almost flat at Rs2,000 crore —- compared with Rs1,988 crore in the year-ago quarter —- even as consolidated net sales increased to Rs33,572 crore.

Passenger vehicle sales remained under pressure as competitive intensity ruled high in the domestic market. The company’s market share in passenger vehicles stood at 11.9%.

“The compact small car segment degrew during the quarter. The overall passenger car segment grew at around 8%. Our sales in this segment declined by almost 11% quarter on quarter in the domestic market,” said Ramakrishnan, chief financial officer, Tata Motors.

Carl Peter Forster, managing director and group CEO, Tata Motors sees the ride improving in the quarters to come. “We have been taking different initiatives for different products. With increase in petrol and diesel prices, customers are now looking at fuel-efficient cars. Our fuel-efficient products like the new Indica EV2 should help us gaining significant sales. Though there has been a decline in month-on-month wholesales sales, our retail sales have been constant in last two quarter,” he said.

“We will continue to train our dealer network and continue to increase our reach. We have to build a completely new sales structure and come up with new finance schemes going ahead,” said Forster.

But analysts see reason for concern.

“Company’s positioning in passenger car is getting weaker which is a cause of concern. Competition is going to increase going further. The company requires a complete revamp as far as strategy for the passenger car division is concerned,” said an analyst with PINC Research.

In the commercial vehicles segment, Tata Motors’ sales remained robust, though the company expects the growth rate to moderate going ahead on rising interest rates and fuel cost.
Domestic commercial vehicles sales increased 13% to 113,186 units, giving it a market share of 60.1%.

Jaguar Land Rover (JLR) sales clocked 62,090 units for the quarter, representing a growth of 4.9%. However, the company’s margins dropped on account of adverse exchange rates.
“The results are weaker than expected, especially on the JLR front,” said an analyst.