Tata Motors sees Q2 profit fall on weak JLR, domestic auto sales, keeps near-term outlook cautious

Tata Motors reported a drop in consolidated net profit in the second quarter of FY25, dragged down by weaker sales across its luxury car arm Jaguar Land Rover and domestic commercial and passenger vehicle businesses.

Net profit for the quarter ended 30 September fell 11% to ₹3,343 crore year-on-year, while revenue from operations declined for the first time in ten quarters by 3.7% to just over ₹1 trillion. A shortage in aluminum supply impacted profitability at JLR, which accounts for two-thirds of Tata Motors' revenues.  

Lower wholesales for JLR and the India passenger vehicle business both impacted the company's operational performance, P.B. Balaji, group chief financial officer, Tata Motors, said in a post-earnings conference call.

Ebitda–earnings before interest, taxes, depreciation and amortization–margin declined 230 bps YoY to 11.4%. Ebitda, a measure of profitability, was down 14.2% at ₹11,736 crore for the quarter year-on-year. JLR revenue slid 5.6% to 6.5 billion pounds, and Ebit margins too suffered a decline of 5.1%, down 220 basis points, due to “temporary supply constraints”.

From the third quarter onwards, the company hopes to be able to accrue benefits it is poised to receive from the Union government's production-linked incentive (PLI) scheme for advanced automotive components.

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It expects pain to continue, however, in the electric vehicle segment in the aftermath of a government decision to remove subsidies from electric cars that are used as commercial taxis. In the September quarter, Tata Motors' electric car sales, which now account for 12% of total sales, were down 16% year-on-year.

The company may also now be adopting a more open stance on hybrid vehicles. “If our customers want it we will think about it,” Balaji told reporters. 

“The fleet segment will take its time…because it works purely on Total Cost of Ownership. We will have to watch how that segment reacts. But I would want to differentiate the personal segment, which is the larger 80% of the market. With new launches coming through, we are quite comfortable looking ahead where we stand on that business,” Balaji said.

On PLI, Balaji told Mint, “We are expecting that by Q3 we should have the first funds being released, which are rightfully due to us as per the PLI scheme, and then that gives us the ability to start accruals because once we know that the first wash has gone through correctly, we should be in a business to make the routine process and start accruing as well.”

Balaji in February said that PLI will be the largest source of funding for the domestic EV business from next year.

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Looking ahead, Tata Motors maintains a cautious stance on near-term domestic passenger vehicle demand.

After a buoyant festive season, the company is expecting to watch how consumer sentiment for passenger vehicle purchases unfolds in November..“If November falls and December comes back then we can say the worst is behind us”.

“For commercial vehicles, the drivers of demand are very well-known. Infra spends have started to happen September onwards, which will help”, Balaji said, adding: “Going forward I definitely expect CV demand to pick-up. I would look at availability of freight. Trucks in October are running much more than in the previous quarter.”

For Jaguar Land Rover, Balaji said the company is watching demand in China “like a hawk” as a stimulus programme that the government has recently put in place plays out.

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