Mumbai: Amidst stronger headwinds in the global economy, Tata Sons chairman N. Chandrasekaran has called for Tata Motors Ltd and its British subsidiary Jaguar Land Rover (JLR) Automotive Plc to be “more agile than ever" and work towards being “future ready".
“Some of the key operating markets for the group are faced with diverse market dynamics requiring specific interventions to ensure sustainable profitable growth," he said in a letter to shareholders in Tata Motors’ FY18 annual report.
Describing the state of disruption faced by the automobile industry the world over, the report said: “We are entering the largest, fastest industrial revolution ever, driven by decarbonization, air quality, digitization, connectivity, automation and technology".
In the letter, Chandrasekaran cited factors such as market cyclicality and muted near-term demand in the US, in addition to uncertainties in the UK and Europe over Brexit and taxation on diesel cars, as forming the “diverse market dynamics" for JLR.
To address these headwinds, the UK’s largest automaker will “focus on optimization, drive operating leverage and manage capital spends prudently", Chandrasekaran said.
JLR is set to spend at least £4.5 billion (around ₹ 40,520 crore), or about 15% of its FY19 revenue, in capital expenditure (capex) over three years, starting this fiscal. If this is to happen, it would be the highest cumulative capex figure for the maker of the Range Rover and F-PACE SUVs. The announcement came at a time when margins are at their worst, failing to fire up the Tata Motors stock, Mint reported on 2 July.
Chandrasekaran believes the “key" Asian markets of China and India “offer high growth opportunities led by GDP (gross domestic product) growth, strong domestic consumption and favourable demographic support" for JLR.
On the home front, the “Indian auto industry is not without its challenges", he noted, listing the impending “structural" shift towards electric vehicles (EVs), the rise of shared mobility and an overhaul of emission and safety norms, among other factors.
“As such, we will have to be more agile than ever and work towards being future-ready", Chandrasekaran added.
However, the Indian automobile is “well-positioned for growth, given low rates of auto penetration, rising incomes and increasing affordability", Chandrasekaran said.
Though the domestic entity continued to post net losses at ₹ 1,034.85 crore in FY18, sales growth outpaced the broader market, resulting in market share gains in the commercial as well as passenger vehicles.
Net losses, however, narrowed from ₹ 2,429.6 crore a year ago. Tata’s stand-alone business has been posting yearly losses since FY15. The company will continue to focus on product development, network expansion and cost reduction, Chandrasekaran said.
Analysts remain upbeat on the stock, but the optimism has been wearing marginally since May, data from Bloomberg shows.
Out of 39 analysts, 27 have a “Buy" rating on the scrip, while 10 recommend holding it. Two analysts have a “Sell" rating on the scrip. The number of analysts with a “Buy" rating in May and June was 29 and 28 respectively.