For Tata Motors, the M&HCV sales declined by 26.15 % in the first nine months of FY 2013. At the same time LCV segment registered a good volume growth of 20.27 % for the same period on the back of good sales figures from its new line of light pick-up trucks Ace and Magic. In the utility segment Tata Motors achieved a volume growth of 3.56 % and passenger vehicles declined by 14.25 % respectively.
The decline in the M&HCV segment is mainly due to a general slowdown in that segment. After growing consecutively for 4 years at a CAGR of ~ 28 %, the overall M&HCV segment showed signs of cooling off in the first nine months of FY 2013. In FY 2012 this segment clocked a growth rate of 18 % mainly due to pre-Budget buying in the last quarter of March. In the first nine months of FY 2013, the overall M&HCV sales declined by 19 %.
Among the Company’s global associations is Jaguar Land Rover (“JLR”), the business comprising two marquee British brands – Jaguar and Land Rover. On March 26, 2008, Tata Motors entered into an agreement with Ford for the purchase of JLR. Tata Motors agreed to pay US$ 2.5 billion in cash for a 100 % acquisition of the businesses of JLR.
JLR Sales Contribution
For FY 2012, JLR’s operations showed impressive growth in sales and profitability. Sales have increased by 37 % and 29 % in value and volume respectively over the previous year. For Q2 FY 2013, net revenue was up 13 % with continued strong demand from China. EBITDA margin grew to 14.8 % (compared to 14.4 % for Q2 FY 2012), on the back of improved volumes, favorable geographic mix, exchange rate benefit and lower commodity costs which was offset partially by increased employee costs. For Jaguar, the sales declined by 1 % in the first nine months of FY 2013. At the same time Land Rover registered a good volume growth of 31 %.
December sales increased in almost every major market with sales up in China (59%), Asia Pacific (45%), North America (6%), the UK (3%) and Europe (3%). JLR’s salesreflect the success of its Range Rover – Evoque brand, the sales of which jumped 34.5 % in December from the year earlier. Just about one year from its launch, Evoque accounts for nearly one-third of JLR’s sales contribution to Tata Motors’ overall performance.
JLR’s strong sales have helped Tata Motors to de-risk from the slowdown in the domestic commercial vehicle business. Over the last few weeks, Tata Motors Ltd’s shares have been the biggest gainers among CNX Nifty 50 Companies on the back of better-than-expected retail sales of JLR. JLR is expected to deliver strong performance over financial year 2014 and beyond driven by the launch of multiple new products including the new Range Rover, new Range Rover Sport, new F-type Jaguar, new Jaguar variants and a new small Jaguar.
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About the Author
Rajat Sharma is a well known stock market analyst and commentator. He has covered Indian markets for over a decade and is regarded for consistently identifying early stage investment opportunities. Attorney by qualification, Rajat has done extensive work for improving corporate governance and disclosure standards.Follow @SanaSecurities