Tata Motors Sees 11% Drop in Q2 Profit to ₹3,343 Crore Due to JLR and Commercial Vehicle Weakness

Tata Motors reported a challenging second quarter for FY25, as its consolidated net profit fell by 11% year-on-year, totalling ₹3,343 crores. The company's revenue also saw a decline of 3.5%, reaching ₹1.01 lakh crore. These results were primarily impacted by weaker-than-expected performances from its Jaguar Land Rover (JLR) division and the domestic commercial vehicle segment.

Jaguar Land Rover, a significant part of Tata Motors' business, saw its revenue drop by 5.6% to £6.5 billion during the period. This decline in revenue was further compounded by temporary supply chain disruptions and a decrease in profitability due to aluminium supply constraints. Additionally, a quality control issue led to the temporary hold of 6,029 vehicles, affecting overall output. As a result, the JLR division’s EBIT margin fell by 220 basis points, bringing it down to 5.1%. Despite these setbacks, Tata Motors remains optimistic about the division’s long-term prospects, especially with efforts to resolve supply chain challenges and improve production processes.

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The company also expressed concerns regarding the domestic market’s performance, particularly in the commercial vehicle segment. The sales for this segment fell by 13.9% to ₹17,288 crore, driven by lower infrastructure activity, reduced mining operations, and decreased fleet utilization due to unfavourable weather conditions. Domestic wholesale commercial vehicle volumes also saw a 19.6% drop year-on-year, further adding pressure to the company’s bottom line. On a more positive note, Tata Motors did see a slight improvement in EBITDA margins for the commercial vehicle segment, which reached 10.8%, thanks to favourable pricing and cost-saving initiatives despite the adverse volume trends.

In the passenger vehicle division, revenue declined by 3.9% to ₹11,700 crore. The demand in the domestic market remained weak, but EBITDA margins held steady at 6.2%, indicating that Tata Motors is managing costs effectively despite lower sales volumes. The company remains cautious about the near-term demand in the domestic market but is hopeful that the upcoming festive season, coupled with increased investments in infrastructure, will help drive growth in the second half of FY25.

Despite these challenges, Tata Motors’ stock experienced a drop of 2% following the announcement of its Q2 results, closing at ₹803.55 on the NSE. The company’s market capitalization now stands at around ₹3 lakh crore, but the stock has fallen by nearly 31% since August 2024, following a period of significant growth.

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In conclusion, while Tata Motors has faced difficulties in its key segments, the company is optimistic about its future performance, particularly during the festive season. The hope is that a revival in demand will offset the current challenges, especially as the automotive giant continues to invest in enhancing its product offerings and addressing supply chain issues.