Tata Motors' Domestic Business Reports Best Net Sales In Dec Quarter

Tata Motors’ domestic business has continued to outgrow its global business as it reported its highest quarterly net sales of around Rs 22,300 crore in the December quarter of financial year 2021-22 (Q3FY22), a 45 per cent jump year-on-year (YoY) from Rs 15,390 crore a year.

In comparison, the company’s consolidated net sales declined 3.2 per cent YoY to around Rs 72,500 crore, from around Rs 74,900 crore a year ago.

This was also the first quarter when the company reported profits at its passenger vehicle (PV) division since Q1FY18, when separate numbers were made available. Before that, the entire domestic business was a single reporting segment for the company.

The domestic PV business reported profits before interest and taxes (PBIT) of Rs 835 crore in Q3FY22, against a loss of Rs 381 crore a year ago. The commercial vehicle (CV) segment, however, reported a loss of Rs 77 crore in Q3FY22, against PBIT of Rs 350 crore a year ago.

The domestic automotive division, which includes the CV and Tata-branded PV divisions, accounted for 31 per cent of consolidated net sales in Q3FY22, just a notch below the decade-high figure of 31.6 per cent in Q2, and up from 20 per cent in Q3FY21. (See the adjoining chart)

However, on a trailing 12-months basis, the domestic automotive business accounted for 26 per cent of the company’s consolidated net sales, the highest since Q3FY13. Tata Motors’ consolidated business includes its British subsidiary Jaguar Land Rover (JLR), the domestic vehicle financing division, besides the domestic CV and PV divisions.

In contrast, the JLR division, which still accounts for two-thirds of Tata Motors’ consolidated net sales, is facing a slowdown due to semiconductor chip shortage. JLR’s net sales dropped 18.3 per cent YoY in Q3FY22 to Rs 47,900 crore, from Rs 58,600 crore a year ago.

The growth at the company’s domestic business is being driven by its PV division, which reported its highest-ever quarterly revenues of Rs 8,600 crore in Q3, a 72 per cent jump YoY. In comparison, the CV division – that includes buses, trucks and light CVs – reported revenues of Rs 12,316 crore in Q3FY22, up 29.2 per cent YoY from Rs 9530 crore a year ago.

The current financial year has so far been one of the best for Tata Motors’ domestic automotive business, especially its PV segment, since the acquisition of JLR in 2007. For nearly a decade after that acquisition, the company’s finances at the consolidated level were dominated by the performance of its British subsidiary, while the domestic business only played a marginal role.

For example, between 2013 and 2020, the domestic business contributed just 17 per cent to Tata Motors’ consolidated revenue on average and very little to profits as the company consistently lost money in its domestic PV business.

Most analysts expect Tata Motors’ domestic business to continue its good show, driven by a robust demand for its new range of sports utility vehicles and first-mover advantage in the electric vehicle segment.

“The India business should benefit from a continued demand recovery. The PV industry has a robust booking pipeline and low channel inventory. Semiconductor supply is gradually improving, with Q4 expected to be better than Q3,” write analysts at Motilal Oswal Financial Service after the company’s Q3 results.

“Standalone business is in a sweet spot, led by healthy cyclical recovery both in PV and CV, whereas favourable product cycle to help drive JLR outperformance,” write analysts at YES Securities.