Home / Auto News / Tata Motors sees revival in commercial vehicle business

NEW DELHI : Tata Motors Ltd expects its commercial vehicle sales to sharply rebound next fiscal, in line with an industry recovery, after two years of double-digit sales decline, a senior company executive said, as India’s largest truck and bus maker bets on a better-than-expected economic revival and greater government focus on the infrastructure sector.

The higher sales, especially those of medium- and heavy-duty trucks, will help strengthen the financials of Tata Motors, Girish Wagh, president, commercial vehicle business unit of Tata Motors said on Thursday. Tata Motors’ commercial vehicle business is more profitable than its passenger vehicles.

The revival in sales will add to gains from various cost-cutting steps initiated in the past year and a half by the company to offset a squeeze on its financials amid a steep decline in sales, Wagh said in an interview on Thursday.

“Looking at the balance between the headwinds and tailwinds, it does appear that we will end up having a growth in the industry next year, around mid to high 30% because this is on a low base," Wagh said. “We had more than 30% decline last year and 25% this year. We are sitting on a low base this year and on that, having this kind of an increase still means we are a distance away from the earlier peak," he said, referring to record commercial vehicle sales of FY19.

Wagh cautioned that the sharp rise in oil prices, as well as input costs due to higher prices of commodities such as copper and steel are headwinds. The firm is also closely monitoring the situation pertaining to shortage of semiconductor-based parts and negotiating with suppliers .

Tata Motors’ commercial vehicle sales fell 41% from a year ago in the nine months to 31 December to 142,292 units. This was mostly due to the lockdown in the June quarter, which led to a halt in factory and showroom operations as well as an economic downturn. In FY20, it recorded a 34% drop in sales to 310,855 vehicles.

The performance of the truck and bus business is key for Tata Motors to boost profitability and achieve its aim of turning debt-free in three years. The automaker saw its vehicle sales improve in the December quarter amid a pickup in the manufacturing and construction sectors.

“As far as fixed cost is concerned, right from the previous year when we knew we were entering a downturn, a lot of efforts were started to revisit each and every fixed cost element and almost to zero-based budgeting. This year we further accelerated our efforts," he said. “So, this will help keep the fixed cost in check, although volumes will go up. Therefore, with all in place, with much lower volumes we were able to see operational profit before tax (PBT) in Q3 and as the volumes pick up this should help us; operational leverage should kick in, and we should see better financials."

Wagh said Tata Motors has sought to partly offset the increase in variable costs such as fuel and commodities through two rounds of price hikes in the fiscal second and the third quarter.

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