Tata Motors Limited (TTM, Financial) is an Indian multinational automobile manufacturing company, headquartered in Mumbai, Maharashtra, India.
Tata Motors was started in 1945, as a manufacturer of locomotives, and made its first commercial vehicle in collaboration with Daimler-Benz AG (DDAIF, Financial).
In 1991, Tata Motors ventured into the passenger vehicle market, becoming the first Indian manufacturer to attain the competence of creating a competitive automobile, when it launched the Sierra. In 1998, Tata introduced Indica, the first completely indigenous Indian passenger car, and in 2008 launched the Tata Nano, the world's most cost-effective car. In 2008, Tata Motors acquired Jaguar Land Rover from Ford.
Tata Motors is the world's 17th-largest motor vehicle manufacturing company, second-largest bus manufacturer, and fourth-largest truck manufacturer, in terms of volume. It is a subsidiary of the Tata Group, and its products include passenger trucks, buses, cars, vans, coaches, military vehicles, and construction equipment.
Tata Motors hits an all-time low
In the recently concluded quarter, Tata Motors has incurred a staggering net loss of $350 million (stand-alone), the highest ever by the company. The huge loss was its ninth consecutive quarterly operational loss. Tata Motors has been performing poorly at home for over two years now. Burdened with high inventory, the company's current commercial vehicle (CV) and passenger vehicle (PV) per month sales are still lower than 2010 levels. Higher fixed costs have proved counter-productive for the company, since the capacity utilisation at its factories is much lower than the actual capacity. According to C Ramakrishnan, Tata Motor’s chief financial officer, the company is managing its PV capacity at just 30% utilisation as compared to market leader Maruti Suzuki's 85%. But remedies to counter its market share slide has not worked in the face of tough completion, with a drop of 6% share in the PV section in December 2014, as against a drop of 14% in December 2011. The CV segment fared slightly better than the PV one in the market, with its share at 48% in December 2014, as compared to 59% three years ago in 2011.
Many of the Tata Motors’ projects were shelved or discarded due to non-feasibility. For instance, the Safari Storme was delayed by five years, and Tata Nano, which had aspirations to sell in Europe and US markets, is sold only in Nepal and Sri Lanka.
Tata Motors compensated some of the loss by using funds made from the sale of bonds and dividends from Jaguar and Land Rover, its cash rich subsidiary. The company has announced that it would raise $1.3 billion from shareholders through a rights issue to reduce its debt and to help in further financial growth.
Future prospects for Tata Motors
The management of Tata Motors is hopeful that there will be a steady improvement in the overall financial performance of the company from the next financial year onwards. Backed by a strong product pipeline, some of which have not been launched yet, the company is trying to find its way to recovery.
Currently, some signs of recovery within Tata Motors have been visible with a slight volume growth in the medium and heavy segment. The company expects that sales volumes will increase in the next fiscal year, which will positively affect the bottom line. The volumes of medium and heavy trucks have sustained the momentum so far, which they gained from October 2014. The CV segment garners more than 70% of Tata Motor’s stand alone profits. The main challenges that Tata Motors will face is to make sure that there is sustenance of sales of existing models, and development of better models which can compete in the rapidly developing auto market.
