Tata Motors Thinks Worst May Be Over For Commercial Vehicle Segment
Tata Motors Ltd. thinks the worst may be over for its commercial vehicle segment as issues related to it are getting resolved.
“If you had asked me a month ago, there were concerns around pace of recovery of commercial vehicles, but as we see the way September ended and how October is progressing, we’re very clearly seeing that commercial vehicle business coming into the equation,” PB Balaji, chief financial officer of the Tata Group company, told reporters in a post-earnings conference call on Tuesday.
“The speed at which it (commercial vehicle segment) has bounced back has definitely caught all of us by surprise,” he said, adding they’re witnessing improvement every week.
This could signal recovery to manufacturers of trucks and buses who were among the worst hit within the slowdown-battered automobile sector. The segment, which was reeling from a sharp drop in volumes because of the dual impact of economic slowdown and revision in load-carrying norms, faced a washout following the Covid-19 outbreak. The domestic commercial vehicle industry, according to ICRA, is expected to contract by 25-28% in FY21, bringing volumes to the lowest in more than a decade.
Domestic commercial vehicle sales for Tata Motors stood at 52,094 units in the second quarter—a 24% drop from a year ago. Yet, sales significantly improved sequentially on the back of rising demand.
The automaker posted a loss for the third straight quarter as its luxury arm, Jaguar Land Rover Plc, continued to face pressure. Net loss stood at Rs 314 crore in the September quarter compared with a loss of Rs 217 crore a year ago.
Balaji said utilisation has started to pick up and metrics such as increase in e-way bill collections and toll collections point to a gradual demand recovery.
The company’s intermediate and light commercial vehicle segments, which witnessed high growth in September, is seeing good momentum in October, he said. Medium and heavy commercial vehicles have also come back to demand, thanks to clearance of mining and national highway and port projects, he said.
The bus segment is a cause of worry for the company. “We don’t see any green shoots in the bus segment until we see the schools open up,” Balaji said. “We’re hoping this segment will pick up by March.”
If the recovery continues, most of the issues facing the commercial vehicle segment will be resolved in three months, Balaji said.