Tata Motors is one the largest vehicle maker in India that manufactures and markets passenger and commercial vehicles. It is also present internationally via UK-based Jaguar Land Rover,which sells a car, and South Korea-based Tata Daewoo, which builds heavy vehicles. In the last decade, the company has climbed ladders to become one of the largest-selling carmakers grabbing market share from competitors. It has also ventured into the electric vehicle space before anyone else.
These factors, along with some others, have led to heavy buying in the Tata Motors share and bullish projections from analysts as the outlook for the company’s business has improved daily. Following are some reasons that have led to this:
Spearheading EV revolution
Tata Motors has the first movers’ advantage in India’s electric vehicle (EV) segment. Domestically, its Nexon EV is the best-selling electric passenger vehicle (PV), with market share pegged at 87% in FY22. Its total EV sales in the passenger PV domain were 19,105 units in FY22, with the current monthly run rate in the range of 3,500-4,000 units. An ICICIdirect estimate says it is well poised to attain a 50,000-unit sales volume in FY23.
The company plans to launch 10 new models by 2025 in India.Its overseas subsidiary JLR is also set to embrace the global EV trend under the ‘Reimagine’ strategy, with Jaguar set to be an all-electric brand by 2025 and Land Rover set to introduce six new electric models in the next five years.
CV sales rising
As the economy has come out of the pandemic, along with an e-commerce boom, demand for commercial vehicles (CV) has zoomed.Thus, the domestic CV industry is amid a cyclical upturn with macro tailwinds, the government’s infra push andCAPEX cycle revival, in place for a period of strong growth aided partly by the low base. This has improved the prospects of Tata Motors, the market leader in the domestic CV space in India, commanding a 42.5% market share as of Q1FY23.
Overall, the company’s track record has been patchy as far as earnings are concerned. However, on a standalone basis – that is, the earnings from India business – it has consistently improved along with sales. The company expects the CV space to grow in double digits in FY23 while already operating near optimum levels on the PV side.
Analysts at ICICIdirect said they expect 14.3% consolidated sales compounded annual growth rate (CAGR) for Tata Motors over FY22-24, along with margins to 14.1% levels by that time, a return to profitability.
The company management has said it stays committed to its long-term vision of healthy profitability at JLR, positive free cash flow generation and consequent de-leveraging of the balance sheet. Along with this commitment, what is making analysts Tata Motors share price bullish are secured funding for its EV business, the launch of affordable offerings in the e-PV domain (Tiago), and big order wins in the electric-bus space domestically.