Tata Motors' June quarter hit by second wave

Automaker Tata Motors clocked standalone revenue of Rs 11,904 crore in the quarter ended June 2021—a 40.6 percent slump sequentially.

While the latest quarter was marred by the second wave of the COVID-19 pandemic, the same quarter last year was severely impacted due to the strict nationwide lockdowns. On a sequential basis, in the quarter ended June 2021, Tata Motors' domestic sales (including exports) plunged 41.7 percent to 114,170 units.

In April 2021, Tata Motors’ sales had dropped 41 percent from the March volumes of 39,530 units.  Sales of commercial vehicles and passenger vehicle dropped 64 percent and 15 percent over the previous month respectively.

May was worse. The company’s domestic sales came down 38 percent from April numbers to 24,522 units—commercial vehicle sales were 31.5 percent down, and passenger vehicles sales were down 40 percent over April.

Yet, the standalone operations saw significant improvement over the last year, as the lower base saw the latest quarter's revenue jump over three-fold compared to Rs 2,821 crore revenue in June 2020.

At Rs 1,184 crore, Tata Motors' standalone net loss in June 2021 more than halved compared to June 2020 quarter's net loss of Rs 2,154 crore.

"Looking beyond the short-term challenges, we see significant opportunities to leverage the mega trends shaping the Indian automotive industry,” said Girish Wagh, Executive Director, Tata Motors in an exchange filing.

The company’s consolidated income for the June 2021 quarter was Rs 66,988 crore, down 25 percent sequentially. but up over 105 percent compared to the June 2020 quarter.

At Rs 4,450 crore, Tata Motors' consolidated net loss narrowed down significantly from the losses of Rs 7,605 crore and Rs 8,338 crore in the respective quarters ended March 2021 and June 2020.

In FY 2021, Tata Motors sold 4.39 lakh units of Jaguar Land Rover (JLR) and 4.37 lakh units of its conventional segment. The company sells more than 50 percent of these 8.76 lakh units in India.

“Semiconductor issues, commodity inflation and pandemic uncertainty will have an impact in the short term,” Tata Motors said in its filing.

"Though the current environment continues to remain challenging, we will continue to adapt and manage elements that are within our control and ensure that Jaguar Land Rover is well-placed to respond to any further market developments," Thierry Bolloré, Jaguar Land Rover's Chief Executive Officer was quoted in the exchange filing.

In the current quarter, JLR sales rose 0.85 percent sequentially to 124,537 vehicles. This is over 68.1 percent growth compared to a year ago, when the first wave of COVID-19 led to lower sales volumes. JLR contributes about 78 percent to the consolidated revenue of Tata Motors.

The rise was led by demand in the United Kingdom and Europe, where electric vehicles are gaining traction with a policy-push from governments.

However, the company had warned of supply shortages in early July. “Shortage of semiconductor supplies constrained production,” the company said. It resulted in a pre-tax loss of £110 million for JLR during the quarter, despite high demand.

"Production plans were hit by nearly 30,000 units in Q1," analysts noted in a report by Emkay Global on July 7. "The impact is likely to be higher in Q2 at around 50 percent of the planned production (of JLR)."

"As semiconductor supply improves, JLR expects to achieve a positive EBIT margin and positive free cash flow in the second half of the financial year," Tata Motors said.

At the domestic level, Tata Motors expects that sequential improvement in overall performance is expected from the second half of the current financial year.