Tata Motors warns of sustained commodity cost pressures in Q3, expects margin relief in Q4 through price hikes and cost cuts

Tata Motors Passenger Vehicles expects sales volumes to remain strong in the coming quarters, even as rising commodity costs, semiconductor expenses and geopolitical uncertainty continue to weigh on profitability. The automaker said on Friday it was focusing on increasing supply, controlling costs and improving margins as it navigates a challenging operating environment.

Speaking during the company's Q2 FY27 earnings media call, Managing Director and CEO Shailesh Chandra said Tata Motors expected absolute volumes to remain strong, but acknowledged that cost pressures were likely to persist through the third quarter.

"We expect absolute volumes to remain very strong," Chandra said.


He added that commodity prices continued to exert pressure on margins, making the operating environment challenging. The company has faced considerable headwinds and expects commodity-related pressures to remain elevated in Q3.

However, Tata Motors is looking at a gradual improvement in profitability in the final quarter of the financial year through a combination of price increases and cost-reduction initiatives.

"In Q4, with a mix of price increases as well as cost reduction efforts, we will try to be slightly better," Chandra said.

The comments come after Tata Motors Passenger Vehicles reported a consolidated net loss of Rs 5,531 crore for the July-September quarter, compared with a net profit of Rs 76,170 crore in the corresponding period last year, according to Reuters.

The company attributed the loss largely to exceptional charges of Rs 6,738 crore, including restructuring-related expenses and asset impairments at its British luxury vehicle subsidiary, Jaguar Land Rover (JLR).

Consolidated revenue, however, increased to Rs 96,920 crore from Rs 72,349 crore in the year-ago quarter.

Commodity costs, semiconductor expenses weigh on margins

Tata Motors is facing pressure from multiple cost-related factors, with commodity inflation emerging as a significant challenge. The company said it had managed to offset approximately 40% of the commodity cost impact through various measures, according to Gupta, who spoke during the earnings call.

The remaining impact continues to affect margins, prompting the automaker to focus on operational efficiencies and cost reduction.

Semiconductor availability is another concern. Chandra said the company had experienced some stress on the semiconductor supply side but had managed to secure the required components, albeit at a higher cost.

"We have a level of stress on the semiconductor side. We have been able to secure it, but it has come at a higher cost," he said.

The company is prioritising supply expansion and stronger profitability as it looks to capitalise on customer demand. Chandra said demand was significantly exceeding supply and that the immediate focus was on increasing availability.

Tata Motors' strategy will therefore involve balancing higher volumes with margin protection, particularly as commodity and component costs remain elevated.

JLR faces uncertainty in China amid geopolitical and inflationary pressures

JLR's performance continues to be a crucial factor in Tata Motors' consolidated financial results. The British luxury carmaker is still recovering from last year's cyberattack, which disrupted production and sales, while restructuring expenses have added to its financial burden.

During the earnings call, JLR Chief Financial Officer Richard Molyneux said the company was in a good position to manage geopolitical and inflationary challenges. However, he flagged continued uncertainty in China, describing the market as a significant concern for the business.

"China is already an issue for us. Can't guarantee that we have reached the decline stage of that problem," Molyneux said.

He also pointed to a considerable contraction in the size of the Chinese market, highlighting the challenges facing JLR in one of the world's important luxury vehicle markets.