Tata Motors sells more in India, but JLR woes send profit crashing 80%

Mumbai: Tata Motors Passenger Vehicles' consolidated quarterly net profit fell 80% year-on-year as supply disruptions and weak sales volume at British luxury car unit Jaguar Land Rover (JLR), combined with a sharp rise in raw material prices outweighed revenue growth. The maker of Safari and Harrier SUVs said it would continue with its growth plans amid a looming leadership change following the resignation of its chairman N Chandrasekaran, also the chairman of parent Tata Sons.

"Tata Motors has a clear strategy and a strong management team focused on execution," said Shailesh Chandra, MD and CEO of Tata Motors Passenger Vehicles, speaking on a post-earnings media call. "We have a robust governance process and long-term strategic plans. So, we will remain fully focused on driving growth and create sustained value for our stakeholders."

Net profit at the Mumbai-based automaker dropped to ₹775 crore in the three months ended June, from ₹3,924 crore a year earlier. Consolidated revenue rose 9.3% year-on-year to ₹95,799 crore. Ebitda margin fell 1.3 percentage points to 7.4%, while EBIT margin fell 90 basis points to 2.4%.

JLR, which contributes 80% to Tata Motors' consolidated revenues, dragged down overall earnings. Wholesale volumes at JLR declined 9.2% to 79,300 units last quarter as a fire at a key component supplier disrupted production, the West Asia conflict affected the operational performance, and the company wound down outgoing Jaguar models ahead of the launch of new Jaguar Type 01. Revenue declined 9.6% to 6 billion, while adjusted EBIT margin fell to 2.8% from 4% a year earlier.

Richard Molyneux, chief financial officer at JLR said the supplier fire knocked out production of Range Rover and Range Rover Sport "for several days", and the company was "not fully able to recover those volumes during the quarter." He said the volume decline was also partly a "natural result" of winding down production of legacy Jaguar models before the new model launch.

JLR's product mix improved, with Range Rover, Range Rover Sport and Defender SUVs accounting for 80.8% of sales, up from 77.2% a year earlier. However, higher variable marketing expenses and adverse foreign exchange further pressured profitability.

Tata Motors' passenger vehicle business in India, meanwhile, delivered strong growth, with volumes rising 46% year-on-year to 182,300 units and revenue surging 65% to ₹17,900 crore. Electric vehicle sales grew 112% to more than 34,000 units.

Higher commodity and forex costs squeezed margins. Chandra said profitability of the Indian business "would have been better" but for the significant commodity impact. He said the automaker can't pass on the entire cost increase immediately and will instead combine "accelerated cost reductions" with calibrated price increases. The margin hit was 4.5% of revenue due to the sharp increase in commodity costs, he said.

Chandra said the focus going ahead would be on "disciplined execution, profitability, scaling up supplies" as the company works to remove production bottlenecks. He said supply conditions are improving, with additional capacity set to come onstream.