Tata Motors shares drop 5%; here's why

Shares of Tata Motors fell as much as 5% on Friday after the automaker reported a 74% year-on-year increase in profit for the quarter ended June. The decline in share price comes as Tata Motors’ domestic passenger vehicle business reported a 7.7% year-on-year decline in revenue to ₹11,800 crore in the first quarter due to lower electric vehicle (EV) sales.

The stock opened at ₹1,119 against its previous closing price of ₹1,144.60 on the BSE. Shares of the company hit an intraday low of ₹1,090.05 on Friday.

The automaker witnessed a moderation in the EV fleet segment demand due to the expiry of FAME-II in March. The EV fleet segment accounted for 10% of Tata Motors’ EV sales in FY24. Its share has now declined to 5% in the first quarter.

Wholesales in the domestic passenger car business fell 1% year-on-year to 138,800 units for the quarter ended June from 140,400 units in Q1 FY24.

This comes at a time when the passenger vehicle industry faced stress in terms of new retail sales as registrations in May and June de-grew 1% and 7% year-on-year after 15% growth in April. The domestic passenger vehicle industry is seeing an all-time high channel inventory with further build up in the first quarter, which will add stress on wholesales.

To liquidate build-up of stock at dealerships, the auto industry has seen heavy discounting across OEMs towards the end of the first quarter.

Wholesale growth in Q1 was flat with steep correction in June to keep channel inventory under control, says Shailesh Chandra, managing director, Tata Motors Passenger Vehicles Ltd and Tata Passenger Electric Mobility Ltd.

Tata Motors maintained its Vahan market share at 13.7% driven by sustained demand for Punch and CNG range. Punch sustained itself as number one model in the industry with 56,000 sales in Q1.

EBITDA margin of the domestic PV business improved 50 basis points year-on-year to 5.8% in Q1 FY25. On profitability, Tata Motors EBITDA margin in ICE was at 8.5% in Q1 FY25 as against 8.6% in Q1 FY24. The company substantially improved EV EBITDA margin on the back of material cost reduction and aided by tailwinds due to lower battery prices.

Tata Motors will enter the mid-size SUV segment for the first time with the launch of EV and ICE Curvv and the company expects it to aid volumes.

Tata Motors reported a 74% year-on-year increase in its net profit at ₹5,566 crore for the quarter ended June 30, 2024 compared with ₹3,203 crore in the same quarter last year. Revenue from operations rose 5.7% year-on-year to ₹107,316 crore for the first quarter compared to ₹101,528 crore in the corresponding quarter last year. Revenues from its luxury car unit JLR grew 5.4% to 7.3 billion pounds. Tata Motors cautioned that global demand is likely to remain muted.