Tata Motors Ltd has been primarily dependent on it's JLR division for a bulk of it's turnover and almost it's entire Profits since the last few years. The Domestic business of Tata Motors, which was mainly dependent on it's Commercial Vehicles division, had seen a slowdown or slump for a couple of years. The company put in place a new management team and made some significant changes to it's hierarchy and then started working on a new strategy. Development of new products gained momentum, both for the Commercial Vehicles division as well as Passenger Car business. The company saw it's sales momentum turning around during the year 2016. Just as things were improving, we saw the Demonetisation take place in November'16, which disturbed the momentum for a month or two. Things started getting back to normal in January to March'17 and then we saw the Supreme Court ruling come in where sales of BS-III vehicles was banned across the country. This had a much bigger impact for Tata Motors as the production of BS-IV engines for M&HCV segment wasn't enough to cater to the volumes. The vendors weren't ready for larger volumes and it took a few months to get the volumes to decent levels. Then we had the GST kicking in from July'17, which had some temporary effect as manufacturers & dealers wanted the keep the pre-GST stock low.
Post July'17, Tata Motors has seen it's M&HCV as well as LCV segment volumes getting back on the growth path very
strongly, which is clearly reflected in the Trailing-Twelve-Months Sales chart alongside. The M&HCV segment, which is the biggest turnover contributor for Tata Motors' Domestic business, saw it's 12-months volumes fall from 1.76 lakh units in Feb'17 to under 1.62 lakh units in June-July'17. Now it is back to over 1.73 lakh units and is expected to go higher in the coming few months. The production constraints for BS-IV engines is now history and the company has seen strong demand for it's new technology products. This itself is a very big positive development for Tata Motors as strong recovery of volumes for it's M&HCV products will translate into strong turnover and profits for the company.
Tata Motors' LCV segment saw a much smaller impact on volumes due to the BS-III ban from April'17 as there were no major production constraints for most of it's products. It's 12-months volumes did dip from peaks of over 2.12 lakh units in Jan'17 to around 2.07 lakh units during April to July'17 period. But the LCV segment volumes have seen a strong recovery to over 2.23 lakh units over the last 4 months, especially with strong demand for it's newer products like XL range of ACE SCVs and Yodha range of pickups. With decent growth momentum in the country's economy, we could see continued positive growth in sales of all commercial vehicles for Tata Motors in the coming months.
One look at the Trailing-Twelve-Months Sales chart for Passenger Cars of Tata Motors and it will give an impression of a dull
segment. But there is a reasonably-exciting story building up there, especially when combined with the UV segment. If we look at the 12-months sales numbers for Cars alone, it started the year with volumes of about 1.3 lakh units in Jan'17, then peaked at about 1.41 lakh units in May'17 and then gradually come down to about 1.34 lakh units by Nov'17. But during this period there has been a substantial change in the contributions of the different products in it's portfolio. Until about May-June'17, Tata Motors was selling it's Indica-Indigo range of cars from all it's car showrooms. These models, alongwith the Nano, were contributing about 4,000 units monthly, i.e. over 30% of the volumes. From the middle of 2017, Tata Motors decided to give all it's showroom space only to the new-age products like the Tiago, Tigor, Hexa and now the Nexon, and some space to the Zest and the Safari Storme. Hence the company has stopped sales of most of the older products, mainly the Indica, Indigo-eCS and the Nano. The small dip in 12-months sales numbers over the recent few months is because the Tiago+Tigor combine was able to substantially fill the deficit of the numbers created by near-Zero sales of the older models. The Tiago+Tigor combine is already clocking sales of about 9,000 units monthly and keeping the company's Sanand plant fairly busy. The company has started offering the Zest & the Bolt for the Cab-operators.
The UV segment is the only one for Tata Motors which has seen a consistent positive M-o-M increase in the 12-months sales figures. Upto August'17, all the credit for the positive progress went to the Hexa, which has seen decent demand since it's launch. But the recent launch of the Nexon is pushing Tata Motors' UV sales number into a different trajectory. Within just 3 months of Nexon's launch, the 12-months sales number of UVs has reached a level nearly 80% higher than what it was at the start of the year. We can see the 12-months number, which is currently at about 34,000 units, reach about 60,000 units mark in another 6 to 8 months time.
In November'17, Tata Motors has managed to grab the No.3 rank in terms of sales of Passenger Cars & UVs, closely beating Mahindra & Mahindra. It will be very interesting to see these two Indian manufacturers push each other in their fight for the No.3 spot. Until a few months ago, Tata Motors was fighting for the No.5 spot with Toyota, but that seems to be history now. Even Honda has seen it's monthly sales number being very volatile in the recent months and has kind of given up on the race of the No.3 position. Renault & Nissan combine too has seen their Kwid-Redigo sales momentum lose steam in the recent months. If Tata Motors manages to carry on with it's sales momentum, it should be the un-disputed No.3 in the Indian passenger car market in a few months time, behind Maruti Suzuki and Hyundai.
