Q2 2025 Tata Motors Ltd Earnings Call
Net pricing was also negative for us. So variable marketing expense or sales support on an incurred basis was 4% in the quarter versus 1.1% in the same quarter last year.
Normally, in the past few quarters, we've been able to more than compensate such moves with contribution cost reductions.
and be assured material cost, quality and the cost of quality are major focus areas for us as we move the business forward.
From an FX and commodities perspective, the strengthening of Stern hurt our operational FX but gave us a strong revaluation effect on debt, so no surprises there.
Next page.
This takes our H1 PBT and walks it to cache.
So you can see at 2.14 billion in the middle, that's strong operating cash after tax, even given the low wholesales in Q2.
And although not the case in Q2 individually, on an H1 basis, investment spending does remain significantly lower than the amount of free cash flow our business generates.
Looking at the working capital side, the lower production has a sort of a double hit on us because it also means the working capital goes negative as payables fall with reduced production.
This has impacted overall free cash flow which was roughly back to the first half. Those working capital effects are going to reverse back out in H2 which will give us a much stronger cash flow in the second half of the year.
The End
Thanks, John.
Speaker Change: Turning to investment. Investment in H1 was just under 1.9 billion, about 400 million higher than the same period last year. This was driven by our BEV transition and our very full and very exciting new product cadence over the next few years.
Engineering Capitalization Ratio was stable at circa 65%.
Speaker Change: Okay, so if I move on to a business update, which I think is next.
Let's move straight in, straight into China.
Speaker Change: So definitely worth giving an update of our perspective on China and what's playing out over there.
Speaker Change: So I think there's two main themes. On the left-hand side, there has been industry-wide discounting and overstocking for quite some time, and this has really started to put
We are seeing considerable insolvencies in that space.
Speaker Change: And that means the loss of retail points for us and other manufacturers to access the market.
Speaker Change: It also tends to have a bit of a domino effect because the fact that some retailer groups are not able to survive reduces the amount of new funding and credit that the other ones can get. So there is extreme stress in the distribution structures for vehicles in China.
Speaker Change: and that's partly related in the middle section where there are also demand challenges both industry-wide and in the sectors in which we operate so premium market down 12% the ice market down 22%
Speaker Change: In that context, our performance in the first half of the year, we haven't done badly. Retails on our imported cars was down 4%. Wholesales were actually up. And we've managed dealer inventory very well and coped really quickly with the loss of retail points.
Speaker Change: So what we'll find is that China is not something that's going to get solved very, very quickly, and it will definitely give us some weakness in that market in the second half of the year. But from where we stand now in Q2, we've done a reasonable job.
Next shot.
Speaker Change: So we continue to invest and invest strongly in our reimagined strategy. So this picture is the bed lines up in Halewood. It's an amazing facility dedicated to bed production. And it eliminates tailpipe emissions, but also you'll see near the bottom of the text on the right.
Speaker Change: It will also reduce our own emissions, so we're taking maybe 40,000 tonnes of CO2e out of Hailwood's industrial footprint.
Speaker Change: So we reconfirm our commitment to our strategy, which means that we will be net carbon zero by 2039.
Speaker Change: only BEVs by 2036 and have a BEV derivative of all of our brands by 2030.
Next chart
So, financial outlook, looking ahead.
Speaker Change: We've mentioned Q2 was hurt by factors largely out of our control and we expect to bounce back strongly in H2.
Speaker Change: Greater than or equal to 8.5% EBIT and net cash positive, they are still our commitments.
Speaker Change: It is worthwhile saying, however, that the headroom to achieving those is tighter than I would like.
Next page.
Speaker Change: Thank you, Balaji. Thank you, Richard. Let me now hand it over to Ramanan and Girish to do the sections on the commercial vehicle. Ramanan, do you want to start? Thank you, Balaji.
Ramanan: I think Q2, the CB industry saw 11% decline year on year in terms of volume, largely impacted on external factors of interest flow down and reduction in mining.
Ramanan: and if you see in terms of our registration market share has been kind of steady, on a half year basis it's at 38.1 despite this decline and the passenger segment has also seen a growth.
Next page.
Ramanan: Also, on a half yearly basis, the EBITDA has improved. It's a double-digit EBITDA that we've been able to manage. EBITDA has improved by 120 bps, and this is leading to a strong PVD, resulting in a good RFC at 137.4%.
Unknown Speaker
Speaker Change: So let me just take you through the walk on the PVT from Q2 of last year to the current year Q2.
Speaker Change: Coming to this walk, you'll see that lower volume has kind of impacted us adversely, but favorable pricing and the variable cost benefits have adequately helped us bridge the gap. Overall, we sustained the margin well, and I would now request Rirish to kind of share more on his insights.
Thank you, Ramanu.
declined by around 11%.
Mainly due to the slowdown in infra-activities.
Reduction in Mining
and also heavy rain impacting the movement of freight.
Speaker Change: In heavy commercials, intermediate, light, medium, commercial vehicles and SC pickup, the volumes declined by
Speaker Change: on 24 percent, 13 percent and 10 percent respectively, whereas passenger carriers grew by 5 percent. Passenger carriers continue to do well.
Speaker Change: I think the kilometers run by vehicles on a daily basis.
This declines significantly.
and on a year-on-year basis.
on the
Speaker Change: lowest level, there was a decline of almost 15 to 17%.
Speaker Change: and we have also seen that the diesel consumption has reduced.
So almost 15% on a quarter-on-quarter basis.
Speaker Change: The good thing though is, in October, which is also a festive month,
Speaker Change: I think the running of vehicles have come back to normal.
Speaker Change: the previous October levels. So, now we need to watch for the remaining month as to how do they
continue at the same level going ahead.
Another good part was
Speaker Change: Despite this year-on-year drop in utilization and a significant drop in utilization,
I think the freight rates moderated just marginally.
which therefore ensured
Speaker Change: Transporter Profitability while it came down a bit but still continued to be
Speaker Change: at a good level, which is, I would say, a healthy sign for the industry.
Speaker Change: A metric that we tracked internally, it did moderate due to the seasonal dip, so it is expected to go down in Q2.
But it continues to remain at a good level.
on the commodities.
Speaker Change: Whatever increase we had seen in H1, Q1 has more or less retracted in Q2, especially steel which has a higher impact in commercial vehicles.
Who is next?
Speaker Change: So Tata Motors commercial vehicles are overall volumes declined 19 percent.
and around 8% year-on-year basis for the entire country.
Let's talk.
and within that heavy commercial vehicles.
Interviews with Light, Medium, Commercial Vehicles and the Passenger Carrier.
Speaker Change: He has been able to perform better than the industry in the first half of this financial year.
Speaker Change: Within this, the MCB truck, that is the 19 ton trucks actually grew in double digits on year-on-year basis.
while the overall industry declined.
Speaker Change: We were able to further improve the contribution of digitally generated leads going into retail by up to almost 27 percent. We are running now at 30 percent higher level as compared to first half of last year.
We continue to launch new products and variants.
Get into
We further accelerated the cost reduction efforts.
and also
improved and maintained realizations across the range.
Despite lower volume.
Speaker Change: both on a mile wide, of course, and quarter on quarter basis.
Electric Mobility.
Speaker Change: We delivered and registered 550 electric buses in the quarter gone by.
Until now, we have more than 3,300 buses running.
F. E. V.
I think despite the fame to not being there.
with the launch of...
Speaker Change: New Variants and New Value Propositions in ASEV with One-Ton Payload.
and now we have more than 6400 vehicles.
Speaker Change: running on roads with cumulative coverage of more than 50 million kilometers.
Speaker Change: And as I said, the volumes have seen a 17% growth on a y-y basis.
Speaker Change: On sustainability, I think we are on track for all our plans.
eat
The decarbonization roadmap in line with the SBTI life path.
Speaker Change: or the secular economy. And within that, you will see that our Pantnagar Plan.
Speaker Change: actually received the Zero Waste to Landfill certification. This is the third plan to receive this certification.
On the smart city mobility.
Now
Speaker Change: More than 200 million kilometers cumulatively and we continue to deliver higher than 95% of time.
So we are now at
Speaker Change: The last leg of deployment of buses under the CSL tender that we had won and more than 2000 buses.
have been deployed.
Speaker Change: We have also deployed 200 electric buses in Jammu and Srinagar and running very well.
Speaker Change: On the PME drive, we welcome it, it's a good scheme.
Speaker Change: It does address the payment security mechanism that we have been talking about.
Speaker Change: But we await further details on some of the other points that we have raised in the pre-built meetings and especially related to an asset-light model.
on the digital business.
I think we continue to build the scale.
Speaker Change: and have also established the revenue model PETAGE, now has more than 710,000
Active Vehicles on the Platform.
and a very healthy daily, weekly and monthly active usage.
Almost 78% monthly active users and 52% weekly active users.
Speaker Change: Our machine learning-based fuel efficiency solution, the Milex RT, is now live on more than 340,000 vehicles and we continue to deliver a median fuel efficiency improvement of around 4.8 percent.
in the quarter gone by.
Speaker Change: He also launched a unique service, API, as a service with which
Heat owners are now able to share.
live location as well as the status of the freight.
Speaker Change: to the shippers. So, the shippers can therefore integrate it into their system and have a better track with respect to the freight.
e-Dukkan, our digital storefront.
have now 34,000 registered buyers.
We are selling more than 28,000 SKUs.
Significant penetration in our detailed segment for spare parts.
Pleatworks, which is our online
We've achieved now more than 10,000.
Retails in Q2.
and almost half of those are absolutely unique retail.
Speaker Change: Related to note that both Fleetage and FleetWorks now we have native mobile apps launched.
Speaker Change: with which I think people can work on it on the moon.
Looking ahead.
We expect a gradual increase in infrastructure spending.
Speaker Change: to boost the consumption and therefore improve the demand as we go ahead.
October has been
for a fairly good month with
A Marginal Increase on a Y-Y Basis.
Speaker Change: Within trucks and buses, we will continue to introduce new variants.
Drive Over Value Selling Agenda.
Speaker Change: On small commercial vehicles, where we are challenged on the volumes.
We are working on a three-pronged agenda.
Austria's
Speaker Change: Improving the value proposition, product value proposition across the range, wherein we decrease the payload and therefore improve operating economics for the customers.
Speaker Change: Convergent challenges, which are being seen in this segment, we have been working closely with the financials.
and then there is a whole set of front-end transformation.
Speaker Change: in set of initiatives which are being deployed to improve the entire operating rhythm.
On service and spares, we will continue to drive growth.
He is in penetration by leveraging our digital storefront.
margins and of course the channel health.
Speaker Change: We will continue with the cost reduction efforts, which have been.
FIDELS 50 initiatives.
So, that is about CV, Biology, Bacteria.
Speaker Change: Thank you Girish. Shailesh, Dhiman, can you take on the PDP's?
Shailesh: Tata Motors in H1 FY25 market share stood at 13.3%, flattish on a year-on-year basis. There was a slight decline in our market share due to adverse salience mix of patches. However, we saw strong growth during the festive period in October, with our market share bouncing back to a new one level of 13.7% as we secured our highest ever monthly registrations of 68,500 units.
Shailesh: Our power trading mix is becoming more emission friendly and is likely to grow further with the launch of Corvigne and Nexon IC and G, both of which have been very well received in the market.
Shailesh: Our traffic confluence is very below target and we have a headroom of 25 km2 which goes to show the impact of our multi-powertrain strategy.
Shailesh: Overall EV industry volumes have been impacted by the challenges in the product EV industry and the withdrawal of certain subsidies especially in the fleet segment.
Shailesh: While there has been a sharp decline in the free tech segment post expiry of the FAME II incentive, we have been able to sustain our personal segment market share at 67% despite an intensifying conflict environment with new product launches.
Shailesh: We continue to work on driving growth in the ecosystem to holistically enable mainstreaming of EVs and the consistent growth in charging infrastructure will be a major tailwind going forward.
Shailesh: Our revenues declined by 4% on a year-on-year basis, reflecting the broader slowdown in consumer demand and the moderation of optics we did to keep our channel inventory under control. While Ibutter margins were steady, EBIT margins declined due to higher DNA charges that we took on our new product launches.
of British Columbia.
This is the profitability walk on a year-on-year basis.
Shailesh: to slow down in consumer demand and a high industry channel inventories have led to a higher state of price discounting in the market.
Shailesh: We have however been able to offset much of the adverse impact through consistent mix improvements and material cost reductions.
Shailesh: What has impacted our profitability is the higher D&E and production development expenses.
which we haven't been able to fully absorb.
Shailesh: due to the loss in operating leverage. And some of the new launches happened only for part of the quarter. So their volume ramp up is still in progress. We've not got the full benefit of volumes there.
Shailesh: For the PVI's business margins, they've remained steady on a quarter-on-quarter basis, while the EV business profitability has shown consistent improvement on the back of battery price reductions and the profits of new product launches.
Chishol, Chishol.
Thank you, Deva.
Speaker Change: Let me start with the industry highlights. The industry registrations and wholesale decreed by 5% and 2% year-on-year and industry registrations are actually 26 month low in September.
Speaker Change: Sustained wholesale, which has been happening in the industry at the rate of nearly 350,000 a month.
Speaker Change: led to build-up of channel inventory and high levels of discounting ahead of the festive season. SUB is happy in sustaining wallets, posting nearly 8% growth here on EUR.
Speaker Change: while Dheeman also spoke about hatcheries and sedans which continue to lose saviours with 20% degrowth that we have seen.
Speaker Change: However, it was heartening to see that the new launches have been able to create excitement in the market.
Speaker Change: and drive footfalls for various OEMs who have launched new products.
Speaker Change: EV industry faced headwinds due to EV industry slowdown and withdrawal of key incentives, particularly for fleet as was also mentioned by Timan, the same two got discontinued.
Speaker Change: and in certain states the road tax benefit also was temporarily kind of it had expired and did not get continued in certain states.
Why we had a strong booking pipeline?
Speaker Change: better by the new launches that is Cove and Nexon CNG.
Unknown Speaker 05.01.01
Speaker Change: We were only limited to the supply during the quarter, you know, it was only limited deliveries that we could do in the quarter and therefore the full benefit of the new launches could not get reflected in quarter two.
Speaker Change: Punch has sustained as the top selling model in the industry in first half with more than 100,000 units which got sold.
Speaker Change: However, market share gains from new products was offset by adverse salient shifts in the industry, which is hatches and sedans.
Speaker Change: growing competition. And in the personal segment, as Rima mentioned in the slide that we sustained, but in fleet segment, we had to take a hit because of the fleet segment not getting the benefit of
after March. Thank you.
Thanks for your piece.
Speaker Change: Talking about industry outlook and TML actions, in quarter three we expect retail to be strong, driven by festivities and the year in demand.
Speaker Change: Industry wholesale may be lower than retail, so as to reduce the channel inventory ahead of the new calendar year.
Speaker Change: that is for the industry. Tata Motors will focus on driving significant growth in retail on the back of new model launches.
And we'll be back by marketing campaigns.
Speaker Change: We would strengthen our dealership network in terms of health as well as reach. Continued effort will be taken forward as far as mainstreaming of EVs are concerned.
Shailesh Chandra, Unknown Executive, Shailesh Chandra, Unknown Executive, Shailesh Chandra,
Next slide, please.
Ratings have been coming through.
Speaker Change: both at the domestic level as well as international level, both here and in JLR. So therefore that is happening, but of course we still continue to, as performance keeps picking up, we will continue to keep working with the editing agencies to step this up further.
Speaker Change: So overall, looking ahead, I think from an outlook perspective, we do remain cautious on the near-term domestic demand.
Speaker Change: but the festive season has just gone by as well which is a pretty strong one and the infrastructure investments of the government starting to come through this should help domestic demand going forward.
Speaker Change: And as far as JLR is concerned, the wholesale will improve sharply as the supply challenges increase.
However, we do remain watchful on the global demand situation.
and we expect.
Speaker Change: The second half of the year to improve significantly and the business to become net debt free as these issues work themselves out.
Speaker Change: Priorities are there, has been covered extensively at the business and let me therefore now quickly cut to the Q&A that is there.
Speaker Change: I think a lot of questions coming through on the guidance and why are we confident to do it on the JLR side.
Speaker Change: Let me start with the first one on that one, Kapil from Nomura. I think it is a tough quarter for the industry and several luxury OEMs have reduced guidance. Please give us some color on how is JLR able to maintain this guidance?
Speaker Change: and in this market conditions and are you still on track for the 10% EBIT margin in FY26? Has there any change that you're thinking about it?
Speaker Change: So let me cover that. We are holding our guidance but with very limited headroom left. If you look at P&L,
Speaker Change: So we've mentioned that we had a quality hold on 6,000 vehicles in Q2, those will be wholesale in Q3.
So that will just reverse back in from timing.
Speaker Change: In addition, we did suffer in the quarter real supply constraints as a result of the flow of our aluminium supply. We only were able to produce 86,000 vehicles in the quarter. Those constraints are largely over now.
Speaker Change: So we also expect to increase production to allow us to wholesale more rapidly.
Speaker Change: So, there's a couple of things that lead us to expect that P&L-wise will pick up.
Speaker Change: On the cash side, I did mention the working capital pickup.
Unknown Executive, Shailesh Chandra, Richard Molyneux
Speaker Change: and we would expect Q4 to be really our dominant quarter for cash generation again this time round.
Speaker Change: Both natural seasonality and not only the elimination but the reversal of some of the constraints that we had in Q2 mean we are still holding on to our guidance.
We also commented on FY26, Richard.
Richard: Yeah, FY26 follows a similar thought pattern, to be entirely honest with you. 10% is still possible, particularly as the DNA effects of extending out
Richard: The end point of our ITER products will still be very relevant in that year, but again, it is getting tighter
Speaker Change: Thanks Richard. Shailesh, this is coming your way in terms of, this is from Pramod, in CRED, your car business profitability has been vulnerable to industry slowdown.
pramod: What structural changes are you taking to ease the situation in the medium term, including strengthening car dealership networks to handle the current slowdown, as well as reliance on new products is pretty high in this business. How would you diversify?
pramod: Okay, so, and the third part I also see in the question, which is on the EV sector. So, let me answer one by one. So, as far as profitability is concerned, I think Hemant covered that in quite detail with that waterfall chart that was shown.
pramod: The whole industry environment was that of discounting in the first half and therefore we had to also discount to compete in different segments.
We have our products positioned.
pramod: However, that was more than offset with the cost reduction efforts that
We have been driving in the organization.
Nevertheless, since we could not.
have the impact and benefit of the volume growth.
pramod: and there was increased DNA, it had an adverse impact as far as profitability is concerned.
pramod: Having said that, I think the cost reduction actions in the company is being expedited.
pramod: and we see that it is going to deliver better than what we have delivered in H1.
So, that is going to...
pramod: As far as strengthening of car dealership network is concerned, I think we were one manufacturer who have taken sharper off-take cuts.
as compared to the industry.
and that has enabled us with the strongest ever.
Retail that we had in October in the festive season.
pramod: finance cost and all would have significantly reduced and we are very particular about the profitability of our dealership. So I think after October, we have significantly been able to bring back
a very positive health of our leadership.
pramod: So that was on the second question. The third is on.
pramod: We have already shared our launches for two years and all, we have already launched Curve.
pramod: There will be hopefully Harrier EV which will also be launched in the EV segment.
pramod: And then we have a Sierra also, which is going to come in the second half of late 2025. So these are the products which are going to come in FY26.
pramod: And of course, it will also include the MCVs, you know, especially in the car segment.
pramod: Okay, so, you know, it has been a bit, you know,
pramod: volatile as far as price is concerned globally, I would say for EVs and the simple reason for that has been steep reduction in the prices of cells.
pramod: and as leading manufacturer in the country, we have tried to pass that on to the customers so that we bring the price of electric vehicles closer to the automatic car price in the ICE segment.
Speaker Change: Thanks Shailesh. Richard, this is coming your way, this is from Nishijala. Could you quantify the impacts of this production loss on your EBIT as well as holding back the 6,000 units? How much of production got impacted and what do you believe is the underlying EBIT if you adjust for these two?
That was one. Second, No. No. No.
Speaker Change: The quality issue per se, could you just give a bit of color on what this issue was and has it been resolved? And lastly, can you also talk about warranty costs that you alluded to saying it's gone up? Anything that we should be highlighting there further?
Speaker Change: Let me take those in turn. So production was only 86,000 units in the quarter, which is at least 10,000 south of where we would have expected it to be.
Speaker Change: If you take the aluminium supply issue and the effect of the 6,000 units
Speaker Change: and the best thing to do, I think, would be to look at our EBIT range over the last seven quarters. It's been in the range of 6.5%, 8.8%. We would have been fairly much in that range had those issues not happened.
Speaker Change: It occurred very late in the quarter and we took the conservative approach of not recognising that revenue at that point in time. The issue is resolved. Parts where they need to be replaced are in process. So those 6,000 units will appear in Q3 wholesales.
Speaker Change: The impact of warranty? Warranty is going up for us. Strangely, even though quality is also improving.
Speaker Change: So even though 12 months in service and 24 months in service sort of repairs in terms of numbers is coming down, warranty expense in cash and accruals is going up.
Speaker Change: That's partly due to inflation in terms of the labour rates of our dealers, that is partly due to the nature of the repairs.
Speaker Change: and it's something we're very much focused on. So it's a strange environment where the quality of the vehicles is improving but the amount of money in cash that we're spending on warrants is simultaneously rising.
Speaker Change: Could you just continue to talk about FME as well as Dealer Compensation in China, they are all part of the same question, all of them are new angles.
Speaker Change: So FME has been higher in Q2 and we would expect it to continue at high levels. I mean, essentially, if you look at FME or marketing,
Speaker Change: and our selling expense as one entity in terms of demand generation.
Speaker Change: Both are going up and we would expect FME to flatten out at roughly these rates. We'd expect VME to rise a little bit further in the second half of the year, but for us
Remember, VME, although we only show you one number.
Speaker Change: It really is a split of still industry leading in terms of low BME on Range Rover, Range Rover Sport and Defender.
Speaker Change: So, we only quote one number, but there is a big sort of discrepancy between our car lines and between our regions in terms of where we spend our PME. Overall, I do expect it to be a little bit higher in the second half of the year, but not massively so.
Speaker Change: And last one in terms of compensation of dealers in China, is there a challenge there?
Speaker Change: Look, there is definitely a challenge with the Deagle network and we're having to be very proactive in how we manage both
Speaker Change: and to support the ones that do remain. Obviously those that do remain have higher areas in terms of where they can sell to. So we're doing it on a one-by-one basis, we're not doing anything generic across the country.
Speaker Change: Staying with you for the next question from Aditya Jawa, Investec. This is about the industry in China between ICE and EV. While it seems the ICE industry has declined, overall PV industry has reported modest growth led by NEVs. On the ground feedback suggests some loss of market share to EVs. Looking at the intensive competition across price points,
Speaker Change: What's your strategy of pollutioning our EVs in the Chinese market?
Speaker Change: So I think, excuse me, there is again a difference you can draw between those vehicles that we produce and sell locally.
Speaker Change: which tend to be in the lower price segments, lower price for us is still quite high industry-wide but they are definitely suffering from NEV competition and remember NEV is not BEV, by the way we have to make sure that that NEV covers PHEV, range extenders and BEV and actually it's
Speaker Change: It's range extenders and PEBs that are quite high in that area.
but regardless of that
Speaker Change: In the lower segments, absolutely, there is very strong competition from the new entry beds impacting the available market for ICE vehicles.
Speaker Change: In the top end, there really isn't yet. So there are no local bands competing at the price points, all the performance, all the brands.
Speaker Change: I'll use the phrase in the killing fields, but you know what I mean, in the mass sector of the market, that is really, really nasty. It is not so nasty yet in the segments of the industry where we really play and where we really rely for our profitability.
Speaker Change: Thank you, Richard. I'll probably give you a break for now when you get some water. I'll shift gears to CE, which we have not had all the questions at the rear end. This is Abhinav Ganesan from SBI Pension Fund. I think you've covered about the festive season demand, but can you talk about discounting? Can you also speak about the discounting that we are currently seeing? Can we comment on the pricing discipline in the market going forward?
Right, okay, so
Speaker Change: I think as far as the fiscal season is concerned, we did see
A very good improvement in the
Unknown Speaker 07.00.00.
Possibility due to increased consumption.
Speaker Change: At the same time, I think October was the first month which was post the rainy season, so we have also seen.
Speaker Change: The TIPR utilization going up, which also indicates that the infrastructure projects have also started doing well.
So that's on the heavy trucks.
Speaker Change: As far as actual vehicle demand is concerned, I think the festive season did see an increased volumes in the small commercial vehicle segment.
and we did see around 30% while month-over-month grating volumes.
in the month gone by.
Speaker Change: Now, as far as pricing is concerned, I think we maintain our position, we continue to have a very disciplined approach.
with price being only one part of the value proposition.
Speaker Change: And on the back of that, I have a very, very disciplined pricing approach. We just continue in the entire second quarter, despite the volumes going down.
Speaker Change: Thank you Girish, staying with you for a while. Next question is from Ginesh Gandhi. You covered this first part of the question. Can you also talk about some banks and NBFCs are highlighting increase in NPS in the CV portfolio. Are you seeing any signs of stress on availability of finance for MNHCV?
Speaker Change: and also what's your outstanding order book of ACV, how's your capacity?
Speaker Change: So Balaji, I think Ginesh has also asked for Outlook. Yeah, he's not with us at the moment.
So,
I think let me go segment by segment.
Speaker Change: So, amongst the four segments that we see in commercial vehicles,
Speaker Change: The passenger commercial vehicles, that is buses and vans, should see the
higher growth in the second half
followed by growth in intermediate light medium commercial vehicles.
Speaker Change: and I think small commercial vehicles and heavy commercial vehicles is something that we'll have to keep a watch on how things pan out. October has been
Speaker Change: A good departure from Q2, which had seen a YOI decline.
Speaker Change: So that's something that we need to keep a track and as I said,
Speaker Change: The daily running of trucks which we track has done well in October.
Speaker Change: need to keep a track of that as we go ahead and see that it continues at that level.
Now coming to your second question about financing.
Speaker Change: We don't see any stress in medium and heavy commercial vehicles, even intermediate commercial vehicles at all.
Speaker Change: But yes, there has been a stress in the small commercial vehicles.
Speaker Change: We have seen from whatever engagements we have been having with the financials that the NPAs have gone up to some extent.
Speaker Change: For small commercial vehicles specifically, I think you've come up with.
Speaker Change: financing schemes which improve the value proposition both for the customer as well as the financial.
Speaker Change: And I think that's something which we are seeing good traction starting from the last month.
Coming to ACE, ED
Speaker Change: See, we have been working with quite a few anchor customers.
Speaker Change: Now we have total 62 ANKER customers who are our repeat buyers.
In the last quarter, we have added eight
such anchor customers and we continue to increase this.
Speaker Change: We are also working with quite a few municipalities across the country for decarbonizing their intra-city transport.
Speaker Change: And we also continue to work with a few retail customers who have been taking to ACV once they are sure about the load carrying capability as well as the range.
Speaker Change: So that's how we are growing the demand on ACV. I think as far as capacity is concerned, we are placed well. We can produce 1000 a month. And as and when required, we can go on increasing the capacity.
Speaker Change: Thank you, thank you Girish. Shailesh is coming your way. IndiaPVs, any comment on growth in festive period and dealer inventory levels?
Shailesh: Yes, so you know in the earlier question I commented that you know it was our highest ever retail slash registration and we focused on reducing the retail inventory levels to normal level.
Shailesh: and therefore we moderated our off-take also to do that in October and even in the earlier months. So now it is down to 30-31 days as I said.
Unknown Speaker 05.15.15
Speaker Change: There was a lot of questions on curve split between EV, PV, sorry, EV versus ICE, as well as how the current response, can you just take all those questions together?
Speaker Change: So, the ratio of EV as far as all the penetration of bookings as far as leaves are concerned and curve has been about 20%.
Very strong bookings.
Speaker Change: Be aware that, you know, the supplies really started in the second half of
Speaker Change: And from October, really, we started seeing the ramp up of our production also. There have been ramp up issues, you know, in Ranjangaon where we have been making these vehicles. Also, there are three or four critical variants which are yet to be launched.
So that had got delayed.
Speaker Change: which should get productionized in December. So real supplies and leveraging all the variants that we have announced as far as COVID is concerned will start being seen from January.
Speaker Change: So, it has been strong and as I said, 20% is the hooking penetration of scoliosis.
Speaker Change: Thank you, Shailesh. Richard, this is coming your way. This is from Rakesh Kumar, BNP Paribas. Does your investment plans have flexibility to be recalibrated if overall demand environment, especially EV demand, comes under sustained pressure? Jaguar is obviously committed to be an EV-only vehicle.
Speaker Change: and incremental launches on Land Rover also appears to be EV heavies. Could you comment on that?
Richard: Yeah sure, so we're in the development of three architectures in parallel. So we have MLA, which is the one on which Range Rover, Range Rover Sport are based, EMA which will be the replacement of the cars below those segments and JEA for Jaguar.
So each of those will get BEV offerings.
Richard: The Range Rover, Range Rover Sport will be the first to get a bed, it will be on exactly the same architecture.
Unknown Executive, Shailesh Chandra, Richard Molyneux
Richard: Next will be the vehicles of the EMA architecture. Those are the ones that are produced in Harewood, where I showed you the picture of the lines earlier on. They will come in early 2026. The first of those will come in early 2026.
and the new Jaguar will come just after that.
Thank you. Thank you. Thank you.
Speaker Change: Do we have flexibility? Yes, because all of those things are ahead of us.
Speaker Change: and there are second and third derivative vehicles in each of those circumstances that we can also push back. So we do have some flexibility.
Speaker Change: But we are simultaneously making sure that we can offer BEVs for each of our brands.
Speaker Change: Because there are still large segments of the market that are going to go that way and we require that for our emissions compliance in many places as well.
Speaker Change: So yes, we have flexibility, largely because our BEV rollout is ahead of us, and I guess that's one advantage of that statement being true.
Speaker Change: So thanks, I think for PLI, the last date for submission of the PLI application was 30th September. We've filed all the...
documentation on time the government has
Speaker Change: have already looked, you know, at all the submissions that's been accepted and, you know, the various agencies will now be visiting our factories to confirm and do the physical verification. The timelines intended for the government for disbursement of PLI funds for 60 days
Speaker Change: from Circuit September. So, since it's already in progress, we expect the funds to come in the coming months.
Speaker Change: In terms of our accounting policy, you know, whenever there is a new scheme announced by the government where the process is still to be established.
Speaker Change: We don't accrue it in our P&L and we typically recognize it when the cash is either disbursed or when there is a certainty of the cash disbursal or timing of the cash disbursal.
So I think let me give
Speaker Change: and Outlook only for H2 because we know what has happened in H1 on a yy basis.
So in H2, as I said,
followed by intermediate, light, medium, commercial, records.
Unknown Executive, Shailesh Chandra, Richard Molyneux
Based on the October numbers,
Speaker Change: We have a positive bias on H2 numbers for these two segments, flat to positive bias.
segment-wise trend, I would say that
have seen very healthy utilization,
Speaker Change: both for school buses as well as intra-city, inter-city buses seeing healthy utilisation and therefore
There is a fair bit of demand here.
Speaker Change: In intermediate light medium commercial vehicles, there is a clear shift which is happening towards 19 ton.
The largest segment, sub-segment in that overall line.
Speaker Change: In heavy commercial vehicles also, we continue to see a shift happening towards the 55 ton tractor trailers for cargo movement.
Speaker Change: And in small commercial vehicle pickups also we see a shift happening towards pickup with higher payload. I think so in
Speaker Change: Each of the sub-segments, there has been a movement happening towards
Speaker Change: Unknown, because with higher load carrying capability, so that's the segment wise trend that we see.
Yep, thanks Girish.
Speaker Change: Yeah, this is from Gudrun Bankam. You've answered the first part of the question on curve and order books. Can you also talk in terms of Nexon cannibalization, the impact of that, as well as understanding the price cuts that we took on the PV portfolio, the rationale for that, as well as the impact on the profitability?
Speaker Change: Yeah, thanks for that. First, on the cannibalization, frankly, one month has, we have just seen one month.
Speaker Change: If I have to go by bookings and the retail that we saw in October.
Speaker Change: We have not seen any cannibalization as far as Nexon is concerned. Actually, we had the highest ever retail of Nexon since 2017 in the month of October alongside Curve also, you know, which had a very strong retail as the supplies came in that month.
Speaker Change: The second one is on the pricing cut. Frankly, you know, the discounting in the first quarter had gone up for all the manufacturers and we took a conscious
Speaker Change: and some significant efforts in the localization which allowed us to do that. And actually, you have seen that despite those steep price cuts that we have taken, our margins in EV business has improved. So that was the rationale.
Speaker Change: Thanks Shailesh. Richard is coming your way on the mix from Rakesh.
Speaker Change: JLRMix is inversed in the recent years, 10 years back the lowest priced model was DiscoSport that used to be the highest selling model and Defender used to be the lowest volume model. It's reversed now. How much of it is supply constraint led?
Or is this the new normal?
Can it reverse as demand normalizes and JLR volume grows?
These are the results of our new strategy.
Speaker Change: So many years ago we were very focused on volume and very focused on the car lines that deliver us the volume.
Speaker Change: Now we're very focused on value and the car lines that deliver the value.
Speaker Change: So, we will not be returning to the old model, we will be focusing on Range Rover, Range Rover Sport.
Speaker Change: Defender, New Jaguar and Discovery to drive value ahead of volume.
Speaker Change: Yeah, staying with you. Could you also, just from Kapil Singh, JLRFCF guidance, any reason for the reduction in guidance from 1.8 billion pounds to 1.3 billion pounds for the current year?
Speaker Change: There's a couple of reasons. First of all, the market is a little bit tougher than we had envisaged it to be. And also, the scale of the investment that's required to keep the ICE portfolio of vehicles going for longer and simultaneously to invest in three architectures worth of BEVs is a little bit higher than we had originally envisaged. Those are the two biggest reasons.
Speaker Change: Thanks again, staying with you. Two more questions coming your way. One is from Amin Pirani and the other is from Joseph George, ISL. Amin, JPM is about, you mentioned the headroom of achieving the targets has become very tight.
Speaker Change: Could you just reflect on the key risks that that you are worried about and what could take this ultimate margin number lower and how do we intend to, and obviously it's not said in the question, but how do you intend to manage it to deliver your guidance that you've called out?
Yes, I do.
Speaker Change: I think you have to be a little bit prosaic in this, that if you look at what the industry has had to go through and what JLR has had to go through in the last five years or so, we've had a series of very major challenges, each of which has hurt us.
Speaker Change: and then we've recovered and we've come out of it. You can think through COVID, you can think then through the semiconductor crisis, you can think through what happened in the UK in terms of thefts and insurance. Each of those three, they've happened, they've hurt us, we've recovered.
Speaker Change: China, I think, has happened, it's hurt us, but still has a little bit of time to play out.
Speaker Change: and then who knows what the next one's going to be.
Um...
Speaker Change: So, look, I think if you had to focus any points in terms of where there might be risk for the balance of the year, it would be China.
We are therefore very aware of that.
Speaker Change: and very focused on making sure that we take whatever actions we need in China in order to defend our positions and also obviously look to see whether there are any opportunities in other markets to offset that. Simultaneously we increase our diligence in terms of cost management to make sure that we don't rely everything on the revenue side of the business.
Speaker Change: Thanks Vijay, staying with you, the comment on the depreciation numbers, those have come down quarter on quarter.
Speaker Change: What should be the sustainable level as we look into the second half of the year? And a quick clarification, is the reiteration of EBIT margin driven by lower depreciation rather than strength in EBITDA?
Speaker Change: I don't think there is a sustainable level of DNA. DNA, we would expect it to be lower in the second half of the year than the first half of the year, for exactly the reason I mentioned beforehand, we continue to extend the period of time for which we build ice vehicles.
Speaker Change: It will increase significantly when we get to the launch of those vehicles, which as I've mentioned is from the back end of 2025 onwards.
Speaker Change: In terms of our EBIT margin, you're absolutely right and you could point out that EBITDA in the quarter that's just passed was only 12%, which is very low for us.
Speaker Change: So we expect part of the recovery in EBIT margin for the balance of the year to be lower DNA but the majority of it to be improvements in EBITDA as well as volume recovers and we are as you know a very volume sensitive business.
Speaker Change: Thank you. Shailesh, this is probably coming your way in terms of, from Ashish J. McQuarrie. We have spoken of increasing the PV salience to 80% versus 55% currently. Any timelines for the new launches and the white spaces?
Speaker Change: You know, what we have announced so far is beyond curve, you know, some of the EV models that we talked about, which is a year EV, which is going to come at the end of this financial year.
Speaker Change: But also Sierra, both in EV as well as Ice version is what is launched, what is going to be launched.
Speaker Change: So in the next two financial years, we should start reaching a penetration level of about 70% and we have said 80% by FY30 is what we have committed.
Speaker Change: It will, of course, include few wide space products, but that is not something which we can share at this stage.
Speaker Change: Yeah, thank you. Actually, I'll probably close with you, given the questions that are coming. There are two types of questions that are there. I'll probably go to the one that comes to us on WhatsApp. In terms of, given the limited headroom, which you have highlighted too, in terms of the guidance that is out there,
Speaker Change: Could you just talk to, I know you've covered it many times in the current call, but I think there's still a little bit of clarity needed and the reassurance needed as well as outlining the risks needed. Could you just...
Richard: take us through your thought process for holding the guide in and I'll probably come to it at the end of it, Richard, after you're done.
Yeah, sure.
and again our old treated P&L in cash.
So.
Pierre Wise
We only wholesaled 87,000 units in the quarter.
hit significantly by two effects which are timing reversing.
6,000 Units Wholesale Hold
Richard: and I mentioned beforehand that we had at least 10,000 units of lower production driven by the issues we had with aluminium supplies. Parts of those two things obviously do overlap a little bit. So that is not just that that disappears in the second half of the year, it reverses.
I mentioned also beforehand that
In our industry, when
Richard: And if you look through the balance sheet, where we ended up the quarter is with payables of just under £900 million, whereas in the normal circumstance they would be north of £1.2 billion.
Richard: So that will also reverse. So just as you get a double whammy benefit when the volumes go down, you get a double whammy improvement when the volumes go up.
Richard: So those are largely the things that drive us to think that H2 is going to be considerably better than H1. I have mentioned that the thing out there that concerns me the most is China.
Richard: but we are holding our guidance and we will do our damnedest to get there.
Richard: Yeah, just to add to what Richard just said, we should also keep in mind that the inventory levels for JLR in its markets are quite under control. We have been absolutely paranoid about ensuring that those inventory levels are kept tight.
Richard: and that has ensured that the VMEs on the cars that we are actually pushing are completely under control, which is the three biggies, Range Rover, Range Rover Sport and Defender. And with the brake events having been substantially reduced,
Unknown Executive, Shailesh Chandra, Richard Molyneux
Richard: China stays and improves from where it is today is an important one if things deteriorate that dramatically and that could skew the pitch.
Richard: Other markets that are currently holding on for us in the current levels
Richard: We have not dramatically shifted volumes over the last few years and therefore it has been a gradual increase. As long as that trend continues, we should be there.
but the overall demand situation does remain...
something that we need to watch out for.
Richard: So we don't see anything that is currently necessitating any shift in guidance given our current inventory situation and the supply issues that we have had. And obviously we'll continue to remain watchful on that particular front. Probably am I missing anything? Adrian, Richard, from your side?
No, I think that's fairer to what I said.
Speaker Change: Okay, maybe then probably the last question that is out there, this is from Chandramouli Goldman Sachs. A little bit more on the China side, in the context of European OEMs cutting guidance due to China exposure, could you share what share of JLR, excluding the JV, the revenue and profit is coming from China?
Speaker Change: as well as what you're thinking on Chinese OEMs looking to compete with JLR's European European EV business.
Speaker Change: and this probably the next one is more to Shailesh which I'll come to separately.
Speaker Change: China is an important market for us, not as important as others, so we sold in terms of wholesales 28,000 in the first half of the year out of a total of 185.
That's the relevant percentage.
Speaker Change: So I won't give you a specific number, but you should be able to work it out from there. Are thinking in terms of Chinese OEMs looking to compete?
Speaker Change: within Europe. Yes, but again at the moment it's focused on sections of the market.
Speaker Change: People don't just treat the European market as one and the Chinese are coming after all of it. They're not, they're coming after a very specific segment of it, at least at the moment.
Speaker Change: That is a segment that ties with the lower end of our existing product portfolio so that will have a little bit of competition but it is mainly targeted at other segments of the market.
Speaker Change: There's another question there about battery packs. I'll take it. I'll take that. This is more for the Indian business. Battery pack costs below $75 per kilowatt hour. Presently, what's the rough range at which we are currently there?
Speaker Change: It's fair to say that the battery pack costs have come down significantly from what they were before. The exact number, for obvious reasons, I will not be in a position to share.
Speaker Change: But you've already seen that in the EBITDA pre-PDX, we're starting to increase of the EV business. It just tells you that as we are getting the battery price reductions, we are passing through in terms of pricing. At the same time, we're also improving the profitability of the business. So that's how we are looking at it.
Speaker Change: With this, I think we have covered all the key questions that are there. If there's anything specific that we have missed out, please feel free to reach out to our investor relations team. Once again, thank you all for your support and patiently.
Speaker Change: grilling us with your questions. Appreciate that. And of course, for the teams both here in the room here as well as the JIRA team there. Thank you guys and see you soon.