Amid a fluid outlook for the near-term with multiple challenges, Tata Motors is taking the right actions to navigate them while taking concerted actions to be future ready and create a virtuous cycle of growth, according to company Chairman N Chandrasekaran.
In his address to shareholders in the company's annual report for 2021-22, he said the company's three independent business units -- commercial vehicles, passenger vehicles and Jaguar Land Rover -- are self-sustaining and the automaker is confident that it would get to near zero net automotive debt by FY24.
"Recent history has been relentless with the global pandemic, military conflict, growing inequality, supply chain shortages and more. Decades of experience has been squeezed into two dizzying years. Businesses have had to cope with this unprecedented sequence of events with speed and agility," Chandrasekaran wrote.
He pointed out supply chain issues and runaway commodity inflation as major hurdles among the multiple challenges faced.
"While the near-term outlook is fluid with multiple challenges that I outlined above, the business is taking the right actions to navigate them, and I am confident that we will emerge stronger," the Chairman added.
Asserting that Tata Motors is "taking concerted actions to be future ready and create a virtuous cycle of growth and returns for our shareholders", he said, "I would like to welcome you on this journey."
Despite margins being impacted by supply chain issues and runaway commodity inflation, he said, "Our India business ended with strong free cash flows of Rs 1,879 crore. We are committed to restoring the profitability of this business as it returns to competitive growth and inflation stabilises."
With Tata Motors Group now operating as three independent business units of commercial vehicles, passenger vehicles and Jaguar Land Rover, he said it has offered differentiated value propositions to their different customer segments whilst leveraging backend and corporate synergies wherever possible.
"This has made Tata Motors lean, nimble and customer centric. Each of these businesses are self-sustaining, which gives me the confidence that we will get to near zero net automotive debt by FY24," Chandrasekaran said.
Looking beyond the near-term challenges, he said, "Jaguar Land Rover is in a strong position with a portfolio of attractive premium luxury products, a healthy customer order bank, low break-evens, and the right future ready strategy to support its distinctive and renowned British brands in a rapidly changing legislative and commercial landscape."
Chandrasekaran noted that the global shortage of semiconductors had a disproportionately adverse impact on JLR's production and sales compared to its competitors. "Even though we took various steps to address the issue, the situation continues to remain challenging. This is a key issue facing Jaguar Land Rover and we are working assiduously to address the same during FY23. This should aid a gradual recovery in performance through the year," he stated.
On JLR outlook, Tata Motors said while the COVID-19 lockdowns in China as well as the new Range Rover Sport model changeover are expected to limit volume improvements in Q1 of FY23, the company expects volumes to improve progressively thereafter, and "we target to achieve a 5 per cent EBIT margin and (over) 1 billion pound positive free cash flow in FY23."
On the passenger vehicles business outlook, the homegrown auto major said the vertical is expected to deliver strong improvement in margins and profitability in FY23 and the company will continue to drive strong sales performance whilst improving profitability and managing supply bottlenecks.
The PV business will continue to step-up new product launches and enhance capacities to cater to increasing demand, it said, adding that despite significant step-up in investments, the business is expected to remain self-sustaining.
As for commercial vehicles (CV), Tata Motors said the industry is poised for further growth on the back of increased activity in road construction, mining and improved infrastructure spending. The supply situation continues to show gradual improvement.
Despite uncertainties, business sentiments continue to be positive with increasing fleet utilisation levels and freight rates, it added.
However, sharp commodity inflation continues to remain a challenge.
The company said it will continue to step-up its investments in products and new business models to deliver customer value while ensuring profitable growth.
"Despite near-term supply challenges and inflation concerns, the business aims to deliver strong margins recovery and profitability in FY23," it added.
Tata Motors Executive Director Girish Wagh said in FY22, unprecedented commodity inflation impacted the CV business margins and the company responded to the challenge by accelerating and intensifying cost reduction efforts, reviewing every cost element and taking pricing actions, towards profitability improvement. Improving profitability is an important priority.
Reiterating Tata Motor Group's commitment to sustainable mobility, Chandrasekaran noted that the shift is irreversible and the company will be amongst the leaders of green mobility globally as it targets net-zero emissions by 2039 for JLR, 2040 for PVs and 2045 for CVs.
"Actions are already underway to deliver the same," he informed the company members.
In India, EV penetration in the company's portfolio is likely to increase further to 25 per cent in five years from 7.4 per cent as of Q4 of FY22, Chandrasekaran said. By 2025, Tata Motors will have 10 EVs, he added.
