Tata Motors sees strong reversal in commercial vehicle sales as recovery takes hold

Mumbai,Yuga Chaudhari: Tata Motors, India's biggest commercial vehicle (CV) manufacturer, said on Friday it expects momentum in its commercial vehicle sales to continue in the coming quarters on signs of recovery in the Indian economy.

Tata Motors sees strong reversal in commercial vehicle sales as recovery takes hold

Announcing its July-September quarter results, the company said its medium and heavy commercial vehicles (M&HCV) category grew 14% year on year during the second quarter.

"Positive sentiment, firm freight rate and extended lower excise benefits supported the overall growth in the M&HCV category," C Ramakrishnan, chief financial officer at Tata Motors, told reporters.

According to the company, positive sentiment led to replacement demand, which supported the company growth of 14.1% in Q2, which is a sharp reversal of the performance over the last 10 quarters.

New launches in Prima LX and Ultra range as well as other product enhancements provide a strong foundation for future growth, company said.

However, small commercial vehicles continued to struggle due to constraints in financing and high interest rates.

Despite the growth in numbers, the company said discounts remained high in the CV segment and were unlikely to go away soon. "Discounts have been part of the industry for the past two years. However, the level of discounting has been stable for past 12-15 months now," said Ravi Pisharody, executive director, commercial vehicles.

"We expect the market to firm up strongly. There is also a gradual increase in capacity utilisation," he said.

Meanwhile, despite growth in certain segments, company's overall domestic operations continued to struggle, dragging its profitability for the quarter. Subdued infrastructure and manufacturing activities, high interest rate regime continued to impact the operations during the quarter. Company's sales (including exports) of commercial and passenger vehicles for the quarter ended September 30, 2014, stood at 127,220 units, a decline of 15.7% year on year.

The company said market response for its sub-4-metre sedan Zest has been strong. "Zest petrol variant has a waiting period of 4-6 weeks, while the AMT variant has a waiting period of six months," said Mayank Pareek, president, passenger vehicle business unit.

Standalone net loss for the quarter stood at Rs 1,846 crore as against Rs 804 crore posted a year ago.

On consolidated basis, the company registered a net profit of Rs 3,291 crore, down 7% from Rs 3,542 crore posted a year ago. Higher taxation dragged profitability for Tata Motors.

On the other hand, Jaguar Land Rover, company's UK-based luxury car unit, reported a decline in profit to 450 million pounds compared with 507 million pounds in the second quarter. The company attributed the fall in JLR profits to an "unfavourable revaluation of foreign currency debt, unrealised hedges and higher depreciation and amortisation".