Q2 2026 Tata Motors Ltd Earnings Call
Speaker #1: Call. Today we Balaji, CFO of Tata Motors Passenger have with us Mr. P. B. Vehicles Group. Mr. Shailesh Chandra, MD and CEO of Tata Motors Passenger Vehicles Limited.
Speaker #1: Mr. Adrian Madden, CEO of Jaguar Land CFO designate of Tata Motors Passenger Vehicles Limited. Mr. Richard Mr. Dhiman Gupta, Rover. And we also have our colleagues from the investor relations team.
Speaker #1: Today we plan to walk you through the results reminder, all participants will be in listen-only mode, and we will be taking the questions via Teams platform.
Speaker #1: same is already open to you to submit the The questions. You are requested to presentation followed by Q&A. As a organization while submitting the questions.
Speaker #1: I now hand over to Mr. Dhiman Gupta to take over. Over to you,
Speaker #1: sir. Thank you,
Speaker #2: Anish. Good evening, everybody. And welcome to Tata Motors Passenger Vehicle FY26. It's a pleasure speaking to Limited Analyst Call for Q2 you. As the report of the first quarterly earnings, as a listed entity.
Speaker #2: Next slide, please. Your CFO statement, as it's the first quarter post the CVD merger, a few hygiene accounting-related matters to get out of the way.
Speaker #2: Of automotive segments, our segment reporting will now comprise others. The automotive segment will now comprise JLR and the Tata Passenger Vehicles business. Other than the CV segment moving out, there is no change there.
Speaker #2: Others will comprise the rest, the financial material ones being Tata Technologies and Tata Motors Holdings Limited, Singapore. Next slide, please. For the purpose of statutory reporting, the published income statement has been reclassed to comprise only the TMPV group for prior periods for a like-for-like comparison.
Speaker #2: However, the balance sheet for prior periods will include CV business assets and liabilities and hence not comparable. So this is something for you to matter related to the demerger as part of the demerger accounting entries we have recorded a profit of 83,000 crores on disposal of the CV value of the CV assets less the book undertaking which is essentially the fair value of net assets transferred.
Speaker #2: So the business was valued at 94,000 crores. By third-party agencies, the book value that was transferred was 11,000 crores. So the delta is about 83,000 crores.
Speaker #2: But this is only a notional gain as there's a contra entry of 83,000 crores as a deemed dividend. So there's distributable reserves or on our net worth.
Speaker #2: Next slide, please. Yeah. Key highlights: while overall an extremely challenging environment, there was absolutely no impact on either quarter with the cyber incident at JLR. There continue to be several bright spots, which we will continue to dial up as we progress out of this incident.
Speaker #2: The RR brand continues to have a strong brand recall. There has been a resurgence in domestic demand post-GST rate cuts. And the Tata Passenger Vehicle Business takes its first bold steps in its international foray with the entry into South Africa.
Speaker #2: Next slide, please. Coming to our consolidated financial performance, with the loss of production for the entire month of September due to the cyber incident, the JLR revenues dropped by 24%, which was partially offset by 15% top-line growth in the India business and the translation benefit in GVP INR.
Speaker #2: The loss in operating leverage carryover of U.S. tariffs impact from Q1 and increased VME flowed through every other financial metric, resulting in a PBT quarter.
Speaker #2: There was an additional exceptional loss loss of 5,500 for the of 2,600 crores for certain expenses related to cyber incident and voluntary redundancy program at JLR.
Speaker #2: The FCF for the first six months of the year stood at 18,000 crores. And I'm sure Richard will talk about how the efforts have been taken to keep liquidity at JLR at very comfortable levels.
Speaker #2: Next slide, please. Revenue and profits net auto debt has increased from a net you've already spoken in the last slide. The cash position end of last fiscal to 20,000 crores, increased primarily coming through at JLR.
Speaker #2: Other entities remain quiet. Domestic India business is net cash, which gives a lot of flex to fund the rich product investment cycle that will be coming through in the years.
Speaker #2: Richard, over to you to take on the JLR section,
Speaker #2: Richard, over to you to take on the JLR section, please.
Speaker #3: Thank you, Dhiman and to the next page, please. So there's no denying this was a difficult quarter with disruption from a cyber incident. This is something that's happening to more and more companies that no company would ever wish for.
Speaker #3: It meant we had to close down our systems in one of the higher volume months of the year: the end of a financial quarter, the start of 26 multi-year range over production, and a new registration plate in our UK home market.
Speaker #3: So even with July and August in line with our expectations, we ended up with 66,000 units of wholesales. The 24% reduction year over year with revenues down the same percentage.
Speaker #3: 8.6%, PBT to negative 485 million, and free cash flow to negative 791 million. The PBT quota there is before a 238 million pound exceptional charge and that reflected both the direct incremental cost of the cyber incident and a voluntary redundancy program under which nearly 500 managers and employees are leaving the business as we costs.
Speaker #3: From an H1 perspective, right-size our negative profit position and 1.5 billion negative free cash flow. So it's a significant loss in Q2, but I do want to put it in perspective.
Speaker #3: The negative 485 million compares to a profit that we made in our last financial year of 2.489 billion. So this loss was significant. It's less than 20% of the profit that we made last year.
Speaker #3: Next chart, please. As per usual, I'll skip over this. I'll cover all the points during the presentation. only. So next chart. From a brand It's there for your reference perspective, as our shutdown was simultaneous across all of our plants, the declines are relatively proportional.
Speaker #3: Range Rover, Defender, and Discovery down between 20 and 25% on previous quarter. Jaguar down 35%, continuing to reflect our planned rundown of production ahead of the brand re-launch.
Speaker #3: we're down 17% overall, From an H1 perspective, but only a combined 10% on the dominant Range Rover and Defender brands, which would have been marginally up if it hadn't been for the September stoppage.
Speaker #3: And that's in a very difficult pocket. Next page. From a regional perspective, our long lead markets were more protected in September as their vehicles were already in transit.
Speaker #3: So, you can see that China and overseas are relatively flat quarter over quarter. The bigger pain was felt in the short shipment markets and those markets where the processing of vehicles through wholesale and retail triggers was most impacted by our system shutdown.
Speaker #3: UK, North America, Europe, in particular. From a half-one perspective, we continue to focus on growing our overseas business, managing a difficult market in China, and starting pipeline refill for other regions as production again starts to flow.
Speaker #3: Next page. So this page shows and it should explain the EBIT walk from the 385 million or so that we had in the equivalent period last year to the 485 million lost just reported.
Speaker #3: The lost volume from cyber, even with favorable mix, cost us £237 million. The Trump penalty, even in a low volume quarter, was £74 million, meaning a cumulative penalty in the first half of the year.
Speaker #3: The other showed there are 40 million, is largely the lost 328 million pound parts and accessories business from the attack, and lower China JV returns.
Speaker #3: VME globally is on the rise, and this has had two effects. Firstly, the actual cost of cars rose by 4.1% to 6.9%, with the most significant deterioration being observed in China due to the new luxury tax that was announced in mid-July, weak demand, and a fragile retailer base.
Speaker #3: But secondly, nearly half of the £257 million adverse is the secondary effect of having to accrue more for vehicles that retailers still had in stock.
Speaker #3: Within contribution cost, warranty spend remains stubbornly high, even though the quality fault metrics continue to improve. Within structural cost, it's worth noting lower capitalization of engineering time as our CAD systems were down during the month of September.
Speaker #3: Foreign exchange: our hedge program protected us against the weakening dollar from an operational side, but the adverse euro moved down to 1.14, impacting our balance sheet revaluations of both payables and debt.
Speaker #3: So it's worth noting there also that the PBT sharing is before exceptional items. We did have an exceptional item in the quarter of 238 million pounds, about 40 million of that was associated with a voluntary redundancy program as we resized our cost base.
Speaker #3: The rest was the direct incremental costs of the cyber incident during the month of September. Next chart. Turning then to cash, the cyber incident drove cash profit after tax down to effectively zero.
Speaker #3: It's really important to note that the third month in any quarter is normally strongly cash positive for us. So the timing of the system's outage couldn't have been worse.
Speaker #3: $828 million, and working investments were relatively flat as the beneficial effect of selling down stock was offset by lower payables from the production stoppage.
Speaker #3: So, free cash flow in the quarter was negative $791 million. Next chart. Two things to note on investment. Firstly, the overall number of $828 million is lower than our run rate.
Speaker #3: And this is due to the system's outage, meaning we were not able to pay September. These will flip back to many capital invoices in Secondly, you can see our engineering payments in Q3.
Speaker #3: capitalization at 55% is lower than the 70% we had in Q1. Our reference that with our engineering systems down, work on the programs we are capitalizing did pause and hence the expense element of engineering rose.
Speaker #3: We reallocated and put as many people as we could into incremental testing and validation, but this still had an effect. Next, we chart.
Speaker #3: In the business update, I suspect the first thing that you'll want me to talk about is the cyber incident. So I will do just that.
Speaker #3: Next page. I'm really proud of how this wonderful company responded and restarted our business within a few weeks. Bad as it was, it could have been worse.
Speaker #3: We set crystal clear priorities as a business: first, customers and sales. So, we focused our parts operation to get parts flowing to help clients and retailers.
Speaker #3: And we restarted wholesale systems to allow as many cars to flow as possible. Second, we paid suppliers and restarted production. We paid thousands of invoices manually to help our supply base.
Speaker #3: And we restored manufacturing from the 8th of October. Third, engineering systems, and then four, build beyond the MVP (Minimum Viable Product) that we had put in place.
Speaker #3: We have restarted at pace. The plants are already working at or close to capacity, and the systems we have started are cleansed and clean.
Speaker #3: So, I'd like to take this opportunity not only to thank my colleagues for their amazing work, but also to thank our retailers, customers, suppliers, and other partners for their patience and support through this time.
Speaker #3: Next page. Looking now beyond the cyber incident to the macroeconomic environment, our industry continues to be very challenging. Geopolitical tensions, regulatory surprises, supply chain shocks abound.
Speaker #3: And threaten an industry based on lean global supply chains and schedules fixed weeks, if not months, out. We will all have to adapt to the new realities.
Speaker #3: But this will take time, and it will take cost. On the global demand side, while there is growth, China's luxury segment continues to shrink, Europe is struggling, and the US, while having some pockets of stability, is not in a position to absorb the scale of global capacity from the other regions.
Speaker #3: Consequently, we anticipate VME levels to stay elevated for some time. On the supply chain side, the recent issues appear to be resolving.
Speaker #3: Although stopping inbound wafer shipments from Germany to China may still chain. We have to imagine that this through their value will not be the last such event.
Speaker #3: Create a period of shortages that works. We will have to robust our supply systems accordingly. This is likely to only add costs and complexity over time.
Speaker #3: Next chart. In our new missions—these are the missions I introduced in our Q1 briefing—it's even more important. We are moving forward with intensity and with focus.
Speaker #3: Those that have immediate impact have been our first priority. You can see them here. And we're making reality, delivering on our great progress in tariff mitigation, emission cost reduction, and driving our export quality up and up.
Speaker #3: You can see a 25% reduction in vehicles off-road. On the high-value missions, we have multiple teams dedicated to material cost reduction. We're taking circa 500 employees out of our admin base and focusing on lean in-market China stocks to protect our margins and those of our retailers.
Speaker #3: In other areas, we're driving parts backorders down massively. We've put 500 retailers through a very impactful program to properly leverage our high-end HALO and bespoke products.
Speaker #3: And we will keep driving these missions even harder. Next. So what does this mean? The production losses we've experienced will also impact quite heavily on Q3.
Speaker #3: It's only in Q4, as our pipeline fills, that we'll return to normal. Q4 is always strong for us. For the full year, we expect EBIT to be in the range of 0% to 2% positive.
Speaker #3: And free cash flow is expected to be in the range of negative $2.2 billion to negative $2.5 billion. We'll update you on FY27 after our next earnings release.
Speaker #3: On that note, I'll stop and hand you back to Balaji and Dhiman. Thank you.
Speaker #2: Thank you, Richard. Moving on to the Tata Motors Ltd's business. After a particularly weak Q1, the domestic PV business has seen a strong rebound in Q2.
Speaker #2: Volumes grew 10% year-on-year for the quarter. Months of September and October where we hit all-time record optics of 60,000-plus into consecutive months. Strong recovery in market share to 12.8% for the quarter.
Speaker #2: Both GST rate cuts and market share during the festive months were at 13.7% to 14%. EV came out particularly strong, with penetration sharply improving from 12% to 17%.
Speaker #2: And along with CNG, accounts for almost 45% mix in our portfolio. That keeps our café well below the thresholds. Next slide, please. EV optics had plateaued at 15% to 16,000 a quarter for some time now, with much of the industry expansion coming from new launches between Q3 and Q4 last year.
Speaker #2: Next on, EV has garnered strong traction, and the very successful launch of Harriet.EV took our optics to quarter. Our market share has now been consistently 24,000 for the clocking 42%, with a proactive product portfolio strategy, which we'll soon add other refreshers, which will be improving the value proposition.
Speaker #2: We should look to further build from here in the coming Sierra EV2X and a lot of please. Revenue growth coming back nicely at 15% year-on-year.
Speaker #2: Segment profitability is nearly back to FY25 levels. Much of the improvement coming through from improving profitability of the EV business, though a fair ground remains to be recovered on the ICE piece.
Speaker #2: PVT of approximately $200 million for the quarter, flattish on a year-on-year basis. Next slide, please. ICE winter margins came in at 6.4%, almost 2% down year-on-year, a combination of higher commodity costs and adverse pricing.
Speaker #2: EV profitability is beginning to come through well, with better operating leverage, mix, and the benefit of the Production-Linked Incentive (PLI). PLI accrued for the quarter was ?125 crore.
Speaker #2: I must also add that the PLI accrued for the full year FY25 of 312.50 crore has now been received in cash from MHI this quarter.
Speaker #2: In terms of profit walk, adverse realization has substantially offset the improvement in volumes and cost reductions. Year-on-year cost reductions you see a net of near 1% of commodity hit we have taken in the last two quarters.
Speaker #2: And a bit more is expected to come through next quarter. In line with our previous guidance, ICE profitability will remain muted for another quarter.
Speaker #2: And we'll see improvement coming through in Q4 on the back of price increases and the Sierra launch. EV profitability will continue to improve on the back of further PLI accruals from Nexon and Harrier EV, both of which have met the 50% EV thresholds.
Speaker #2: Over to you,
Speaker #2: sir. Thank you, Dhiman.
Speaker #3: So let me start with the industry highlights for quarter two. The first five months of the fiscal year saw stress in demand for the industry.
Speaker #3: With about 1.6% year-on-year degrowth in the period from April to August in the overall operating environment of EVs. With the implementation of GST 2.0 in 2025, we saw an improvement, which resulted in a reduction of GST for EVs across various segments. This GST reduction has led to price drops of up to 10% in some segments.
Speaker #3: Due to this reduced GST festive season and some pent-up demand post GST announcement, the PV industry has seen a sharp growth. At 5% in September and more sharply in October at 17%.
Speaker #3: While there has been growth across all the subsegments, it has been more pronounced in certain segments; for example, compact SUVs, which have received a strong boost due to the new taxation structure.
Speaker #3: Alternate part rates continue to see industry beating growth at 17% growth year-on-year for CNG segment. And 126% growth year-on-year for EV segment. CNG growth has been driven by growing CGD network and greater traction due to increased accessibility.
Speaker #3: The EV segment's growth is on the back of new launches, such as the Harriet.EV, which has added volumes, along with a general positivity around EVs. The actions that we have been taking in the last 18 months on structural business processes and service have yielded strong returns and laid the foundation for Tata Motors to drive growth in the coming months and quarters.
Speaker #3: In terms of key highlights in Q2, we saw double-digit year-on-year growth in our wholesale, which was driven by the watershed month in September 2025.
Speaker #3: In September, we achieved many milestones, including record overall volumes, CNG volumes, EV therefore we were able to drive steep 47% volumes, and year-on-year. We also were number two clear in the industry with 14% market share and 200 bips improvement in market share.
Speaker #3: In terms of products, we saw strong demand for all of our products or all of our products in specific Nexon emerged as the number one product in India.
Speaker #3: Harriet and Safari saw also witnessed strong interest among consumers. We record volumes. were also able to see very strong booking traction with the And Punch doubling of bookings post 22nd September.
Speaker #3: Which created a very strong pipeline for the coming months as well. Slide change, please. I also wanted to talk about our performance in September and the complete picture of how the festive season has panned out for us.
Speaker #3: I already spoke about performance in September. In October, we leveraged our robust pipeline to continue our strong performance. Just in order to give you a performance.
Speaker #3: With 61,000 units of wholesale, which was our highest ever, we also had a blockbuster festive season where we delivered over 1 lakh vehicles between Nora 3 and Diwali.
Speaker #3: This represents a 33% growth over last year. In terms of alternate powertrains, we also saw record retails for our EVs and CNG at 9,025,000 units, respectively.
Speaker #3: On the back of our record retails, we were able to drive sharp reduction in dealer inventories. Which are now at a very healthy level of under 30 days.
Speaker #3: To be very specific, it is about 27 days. In terms of one market share, we sustained our position as the number two player with 13.7% market share.
Speaker #3: Our products continue to see very strong traction as Nexon was the number one model in October as across all powertrains for the well. product.
Speaker #3: Punch also saw very strong demand with over 40,000 retails in the past two months. Harriet and Safari continue to see very strong volumes.
Speaker #3: On the back of the newly launched Adventure X version and strong demand for the Harriet.EV, we will aim to continue the growth momentum by leveraging our robust demand pipeline.
Speaker #3: And this will be supported by comprehensive marketing campaigns that will amplify brand visibility and maximize our retail in Q3. This will ensure lean inventories as we step into the next calendar year.
Speaker #3: In addition to the growing traction for our portfolio, we will drive strong volume growth on the back of new product launches. That will strengthen our portfolio.
Speaker #3: One launch of the new negative X Sierra in November '25 will be one of the key drivers for volume increase and profitability improvement for the business, as Dhiman also mentioned.
Speaker #3: Harriet and Safari petrol variant will expand their addressable market. And unlock volume potential in key markets. In EVs, we will sustain our growth momentum by strengthening our portfolio with more rapid product interventions.
Speaker #3: As compared to drive mainstreaming through key actions to expand consideration for EVs and ecosystem actions, for example, ICE. At the same time, we'll be expanding charging infrastructure with Tata EV mega chargers.
Speaker #3: As we grow our volumes, we'll enhance profitability through operating leverage and an improved mix, backed by new launches and the impact of GST. Additionally, we'll accelerate our cost reduction efforts and continue our structural actions to strengthen our network and customer service.
Speaker #3: Which efforts. will act as a post-multiplier At the same time, we'll driving long-term sustainable growth. So that's all from my side. Handing over to you, Balaji.
Speaker #2: Yeah, thanks Harish. Rapidly wrapping it up. I think from free cash flow perspective, we had 1,600 crores of free cash flow coming this year.
Speaker #2: This quarter, sorry. With a cash profit of the tax more or less covering off the investment-based despite significant step up in investment that you're seeing on the EV side.
Speaker #2: And as volumes are picking up, obviously there's a working capital return coming our way as well. If you see in the payables line. Next slide, please.
Speaker #2: Investment spending, as I said earlier, continues to be strong. And we intend to keep it this way as growth picks up as well. And with the product offensive that's already planned, obviously all these are likely to continue to remain elevated.
Speaker #2: But no stress on the cash flow side. Looking ahead, I think as Richard alluded, the global demand situation continues to remain challenging. And it's fair to say that this situation from a demand perspective ain't likely to abate in the coming quarters.
Speaker #2: So, therefore, we need to be prepared for driving up demand through actions from our side. Domestic, on the other hand, we are clearly seeing a resurgence in the demand.
Speaker #2: And this also means as the product offensives continues, which Shailesh alluded to, we'd expect to see the domestic side second half likely to be pretty strong.
Speaker #2: Fair to say that for all of us, H1 performance has been disappointing. And particularly challenging at the end of course, Q2 has been JLR.
Speaker #2: So, we anticipate in this situation a stronger H2 as the JLR recovery actions kick in, and the product actions kick in on the domestic PV side.
Speaker #2: From a priorities perspective, particularly on the JLR side, the next phase of recovery is what we are focused on, wrapping up production stepping up engineering intensity.
Speaker #2: And of course, hardening the system landscape. So the situation doesn't recur. And of course, navigating this global demand environment by building the power of our brand is what we'll be focused on.
Speaker #2: And at the same time, cash flows need to be improved. Therefore, the enterprise missions are a very critical way of delivering that. PV EV side, Shailesh has covered it extensively.
Speaker #2: So, I wouldn't want to repeat it. And I can already see a lot of questions coming through on the line. So maybe you're ready to take on the questions that are coming up.
Speaker #2: So let me first start. Richard, maybe I'll pass it on to you. There's a fair number of questions coming your way. Why would we not take all the questions of JLR in one shot?
Speaker #2: Because a fair amount of repetition is coming in as well. And let me start with the most liked comment, which comes from Benai, saying: "Morgan Stanley, I think you're starting with..." Sorry, let me hold off.
Speaker #2: Let me probably Shailesh back give it back to you. Could you comment on the Harriet EV run rate and outlook? Number one. And PLI, are you getting PLI for Harriet EV?
Speaker #3: Yeah,
Speaker #3: As far as Harriet EV is concerned, our run rate is about 2,500 a month. We have a very strong booking pipeline, with a waiting period of somewhere between 16 to 18 weeks.
Speaker #3: As far as PLI, is concerned,
Speaker #3: what was the second question I'm going to see? Are we
Speaker #2: Are we taking PLI? Are we taking PLI?
Speaker #2: approval on Harriet? Yeah,
Speaker #3: so you want to
Speaker #3: take? Yeah, so Harriet.EV
Speaker #2: is right now under 80 certification. We believe it meets the greater than 50% EV threshold, but it will take time to complete the process.
Speaker #2: And we expect the approvals to happen in Q2.
Speaker #3: Yeah, okay. And
Speaker #3: what any other questions?
Speaker #2: Discounts in Q4.
Speaker #2: the festive period. As the VM is going to come down.
Speaker #3: These were the two questions, right?
Speaker #3: In January, our Q4. Yeah, are you seeing any other pricing? We'll take the price increase, typically what we generally do for the last nine months.
Speaker #3: We have not been able to. But with the commodity prices increased, we need to pass it on. So that will be the timeline. Of course, in after the December is over, when the whole industry will be starting with clean stock, the whole discounting environment should also go down.
Speaker #3: So that's what we expect. So the VME should also go.
Speaker #2: Thanks, Shailesh. Richard, coming on to you, a couple saying Namura. What are the Q3 build rates? And can the management please guide on the full-year volume range on which you're basing your margin guidance?
Speaker #2: And have the full cyber costs been taken, or are there more to come in Q3? What is the outlook on VME and tariffs? Also, does the long-term EBIT margin guidance of 10% still hold, or does it need to be reviewed?
Speaker #2: There's a lot of questions in that.
Speaker #3: Certainly. In Q3 build rate, during the month of October, we stated that we started production at our engine facility on the 8th. We have since started all of our plants.
Speaker #3: We would expect production well; production in October was circa 17,000 cars. As of now, our plants are operating pretty much at capacity levels.
Speaker #3: And we will keep them at capacity levels from now through to the balance of the year. In terms of volume range, I think to be honest, you've probably got enough information from that to be able to work it out.
Speaker #3: But I'll lay it out more clearly for you. So we had a month where we sold where we produced nothing September. And we had a month where we produced 17,000 where we would normally produce considerably more.
Speaker #3: So the total loss production you'll be able to work out for yourselves from that is around 50,000 units. Of that, you'll note that we took a hit of about 20,000 units in Q2 coming down from a volume of 87 to one of 66.
Speaker #3: The logic of that is that the balance is going to occur in Q3. Q4 for us will be a normal quarter. And you can see from the historical numbers what a normal quarter for us means in terms of volume.
Speaker #3: So I think from that, you have enough to be able to work it out. I'm not going to give a specific range. But you can work it out from that.
Speaker #3: I said to you, you can take the same answer. So the full cyber cost has been accounted for; it did hit us also in Q3.
Speaker #3: So there will be another considerably smaller exceptional charging in Q3. But the big effect on Q3 is going to remain the volume pull-through. As I say, we'll be operating at capacity in terms of production capacity through the balance of the year.
Speaker #3: So the fundamental question then is, look, what's going to happen in FY27? How much are you going to be able to get back and not?
Speaker #3: And this industry at the moment, it's difficult to forecast what's going to happen in a month, let alone 17 months. So we haven't set our plans for next year now.
Speaker #3: On the one side, pipeline stock. On the other hand, the pressures of geopolitics, we'll enter the year with a very low demand, and supply chain resilience will not immediately abate.
Speaker #3: So we'll have a better picture when we get to our next earnings announcement as to how the balance of those forces will operate through FY27.
Speaker #3: It's only in FY27 that we really have the opportunity to build back, even if the demand is there. Have I covered everything?
Speaker #2: Oh, yeah.
Speaker #3: Sorry, VME, we would expect given where demand is at the moment, and the overcapacity that exists in the industry, we're not anticipating VME is going to get any easier in future quarters.
Speaker #3: It might a little for us because our pipeline stock is now extremely low as a result of this incident. So we don't have the same volume pressure.
Speaker #3: But from an industry perspective, there's little to assume that it's going to come materially down. And in terms of tariffs, the Q2 numbers that I presented there include most of the reductions down to 10% tariffs from the UK and 15% from Europe.
Speaker #3: There will be a little bit more improvement in Q3. But it's certainly an awful lot better than it was in Q1, but still very painful.
Speaker #3: Does the long-term EBIT guidance of 10% hold? Or does it need to be reviewed? I think that my same comment there is as of FY27, we're going to look at our plans now that we've recovered from this incident and reset budget for next year and walk from there.
Speaker #3: So no comment either way on that one at this point in
Speaker #3: time. Yep.
Speaker #2: Thank you, just staying with you question from Rakesh Kumar. Do you think the US tariff and China luxury tax have structurally brought down margins outlook?
Speaker #2: And could you comment on your order book? And then as of the FCF hit of $2.2 billion, $2.5 billion, how much of it do you expect to recover?
Speaker #2: And any changes to the range over electric and Jaguar launch timelines presumed due to the cyber
Speaker #3: Okay. On the first
Speaker #3: Point, the answer is incident? Probably yes. I don't think the process in the US of tariffs feeding through into consumer prices has yet fully concluded.
Speaker #3: U.S. inflation remains relatively benign despite the tariffs. I think that is because the price effects will occur over a 15- to 18-month period rather than immediately.
Speaker #3: So, at the moment, it looks from what I can read of U.S. inflation data as if companies are taking the majority of the tariff costs, at least for the moment.
Speaker #3: China luxury tax, absolutely. I think virtually all manufacturers that operate in that luxury segment above $900,000 RMB, which is where the new base has been set, are at least for the moment taking those costs.
Speaker #3: So from where I stand at the moment, yes, I do think they are probably changes. Can we share the order bank? structural was a really, really critical piece We've stopped doing that now.
Speaker #3: supply constrained. That's no longer really the case. So it's not something that every of the free cash flow hit, I we're going to report on The order bank to my comment on FY27.
Speaker #3: We don't have a quarter. The opportunity, given the fact that we are on the recovery, will be running our plants at capacity between now and the end of March.
Speaker #3: We don't have the opportunity to recover much of it this year. How much of it we can recover next year, we will work through and report back to you when we get back in, I guess, late January, very early February.
Speaker #3: And then, any changes to the range over electric and Jaguar launch timelines? No. I think if you look at what happens during the cyber incident and the priorities I mentioned, we did prioritize getting sales and production up ahead of engineering.
Speaker #3: So the engineering systems were down for a little bit longer. That meant that CAD was a little bit behind, but then we put the people to work in terms of extra testing and validation work.
Speaker #3: So how the balance of those two things impacts we'll see. But nothing to communicate at this point in
Speaker #2: Thanks, Richard. Let me get back to PV here, and then I'll come back to you as well. Get a breather in between. India PV, why was this from Dhinesh?
Speaker #2: Why was India PV realization down despite rising share of EV and CNG? What's your estimate for second-half volume growth for industry and TMPV? And how are discounts shaping up post-festival?
Speaker #3: Yeah. So see, realization per car has increased as you rightly said that the share of EV and CNG has increased. So realization per car actually would have increased by 15%.
Speaker #3: The exact number we can ask Steven once. But you might be referring to the chart which Dhiman had shown where because of the higher discount in VME, there was a drop.
Speaker #3: So, that is the incremental change in VME that was shown. So, that's the answer to the first part of your question. The second is what we would estimate for the second-half growth for the industry.
Speaker #3: So I believe that this should be in double digits. The way we have seen in September and October, the industry has grown by 5% and 17%.
Speaker #3: Even if I take out the festivity in demand, which would have grown because of the festive period, or the pent-up with still continues to be strong.
Speaker #3: My estimate is that it should be a double digit growth. So overall, in financial year, because the first half overflow in November and December should also had seen decline, of 1.6% before the festive period.
Speaker #3: So overall, it should be in the zone of 5% or so. Third question is how discount shaping of course, I already answered this, that from Jan, onwards, we should start seeing increase.
Speaker #3: But post-festive so far, the discount has remained.
Speaker #3: More or less the same. Yeah.
Speaker #2: Thanks, Dhinesh. So probably a question that I will take. Has there been any actions taken at Tata Motors PV and other group companies so that this doesn't happen in the future?
Speaker #2: This is from a couple of needlessly agree. I think this is a critical development, and therefore, all learnings that are coming out of JLR and indeed being shared to the extent that it is possible and relevant to the concerned company. Of course, there's also a group-wide initiative that's kicking off to ensure how do we harden the system and how do we make ourselves more resilient.
Speaker #2: And how fast we can bounce back. So this will obviously all these learnings will be factored in our planning not just at a company level, even at a group level.
Speaker #2: And therefore, that's being led out of Tata Digital. The head of digital for Tata Group, she is leading it herself. And therefore, you should expect to see a lot of action from at a group level as well.
Speaker #2: As much as we are doing work within the respective companies, including Tata Motors PV as well as JLR. Richard, coming back to you, Dhinesh saying Morgan Stanley, JLR top line, any backlog built up due to production cuts?
Speaker #2: Then on JLR expenses, raw materials ex US tariffs as a percentage of sales are also up sharply this quarter, quarter on quarter basis. What drove that?
Speaker #2: And why did US duties impact fall sharply in Q1 this quarter? Why is VME up, which I think you've already talked about? And is the full impact of cybersecurity, which also you've talked
Speaker #2: about? All right.
Speaker #1: So let me try and cover the bits that I haven't already spoken about. In terms of backlog, look, I think I've referenced the amount of production that we have missed.
Speaker #1: we will actually get back will be determined in FY27, which is the And how much of that first opportunity we have to build beyond the capacity that we currently have.
Speaker #1: Raw materials, look, I think there's nothing specific in the quarter that impacts raw materials. The foreign exchange rate of the euro down to 1.14 certainly didn't help in the quarter, as a significant percentage of our raw materials are euro-based.
Speaker #1: So to report. Then US duties fell sharply. That's two things. One is the there's nothing particularly there volume, because obviously, it's a per-unit charge.
Speaker #1: The second is that in the first quarter, the tariffs were largely 25% for all imports, including from both the UK and from the EU.
Speaker #1: It's only in Q2 that we see the effects of the deals that were struck between and the Trump the EU and UK governments administration that took the UK rate down to 10% and the EU rate down to 15%.
Speaker #1: So there's two impacts there. One is the lower volume, but secondly, there are the deals done between the various governments to take the rates down to levels which are less penal.
Speaker #1: Do note that, even though they're less penal, it's a 300% increase in tariffs for vehicles sent from the UK and a 500% increase in tariffs on vehicles sent from the EU.
Speaker #1: Then VME, I've covered. China, I've covered. And the cybersecurity thing, I have also covered. It does go into Q3.
Speaker #2: Thank you, Dhinesh. I think Shelley is coming back to you. I think this is on E20. With E20 becoming mandatory by December 25, early consumer concerns around mileage drop and corrosion on the pre-23 models any comments you have?
Speaker #2: Have you observed any measurable impact on that? On the old vehicles? And is there any proactive measures you're planning to take?
Speaker #3: See, it's true that there is a bit of mileage drop that is for sure. And 2025 onwards, whatever we are selling is E20 compliant.
Speaker #3: So there's no risk of any material getting damaged. But yes, of course, the cars which have been made before that, first, we are respecting the warranty terms of whatever cars we have sold earlier.
Speaker #3: So, that is not a problem. We have also tested the components that might have the potential of failing, but there's not going to be a big cost item, as per se.
Speaker #3: But the availability of the items and all will be made sure. So there's no specific product in terms of extended warranty or something which we have specifically for this.
Speaker #3: This is like ongoing maintenance that can take care of this. As far as resale value is frankly, I have no data to share concerned, on this.
Speaker #3: Resale value remains strong. The greater impact we have to measure post-GST, the price of the prices which have gone down. Still, all these have to be assessed, but not because of E20 issue we are seeing any issue as far as resale value is concerned.
Speaker #2: Yeah. Thank you. Shelley, I think I'll probably stay with you. Wonderful. Just of course, congratulations to you for your role. This is from Kapil Singh Namura.
Speaker #2: For your new appointment that's coming through as the president of OICA, great to see EVs bouncing back. And what was the FY26 fully of PV industry outlook?
Speaker #2: How should one see that? And how is the current demand and footfall versus presumed, especially post the festive season? And the industry discounts you already talked about.
Speaker #2: How should one see that? And how is the current demand and footfall versus presumed mean post the festive season? And industry discounts you already talked about.
Speaker #1: Yeah. So thank you for the wishes and compliments. Thank you so much. It's definitely an honor to be elected as the president of OICA.
Speaker #1: As far as EVs are concerned, you had just a comment, so I don't need to answer that. But as far as growth is concerned, PV industry growth in FY26, I just said that second half, I expect that the growth will be in double digits.
Speaker #1: That's my estimate. And therefore, at a full-year level, the growth rate would be about 5% or so, around plus or minus 2%, you can say.
Speaker #1: The next question part of the question.
Speaker #1: was? I think you've covered the Yeah.
Speaker #2: question. So Richard, the question was also on the mix, if it has changed a bit.
Speaker #1: Of course.
Speaker #1: Footfall. Footfall.
Speaker #2: I see. Footfall, of course, it is weaker than the festive period, but stronger than what we typically see in November. So that remains strong.
Speaker #2: It indicates that there will be growth versus last year. In terms of mixed change post-GST, we clearly see that the compact SUV segment is seeing greater traction as compared to our segment.
Speaker #2: But traction is all across all the segments. However, there is more traction that we see in the compact SUVs. If there are a few more questions on demand coming up, which I'll cover later, this one is from Nishit Jalan. Richard, coming to you.
Speaker #2: A critical question. Apart from the cyber issue, big reasons for cut in margin on FCF guidance seems to be due to higher VME led by weaker demand globally and luxury tax issue.
Speaker #2: Have these issues worsened since Q1? Results?
Speaker #1: Sorry, where? I'm just trying to find the
Speaker #1: question. There it is. Big reasons for cutting margin.
Speaker #2: the most slide. And if not, should we not have cut guidance last Nishit Jalan, go to
Speaker #1: Actually, the issue versions. Yes, they have worsened since Q1 results. Is the bottom line. I think demand continues to deteriorate in China. And doesn't get any better in other regions.
Speaker #1: So I think the reality excluding the cyber is even been amending guidance at this point. But this is the right point for us to be amending it.
Speaker #2: Yeah. Thank you. And again, staying with you for a minute with the cost reduction efforts, what could be the reduction in breakeven levels that you are targeting from about 300k units earlier?
Speaker #2: Maybe you want to comment on the 300k except to begin with.
Speaker #1: Yes. So look, I think the big issues that we got at the moment is trying to make sure that those breakeven levels don't rise as global demand falls and VME levels increase.
Speaker #1: purpose of the missions, is to make sure that those breakeven levels So that's the don't actually rise to dangerous levels. So I don't think at the moment the question of having it drop is a question of stopping it
Speaker #1: rising. Yeah.
Speaker #2: Thank you. Can you talk about the segment that you're seeing you. demand growth in the India Shelley's coming to PV business, particularly post the GST cut, I presume?
Speaker #2: the consumer coming back specifically? You talked about the compact segment, but it's more And is broad-based. Maybe we want to take one segment at a
Speaker #2: time.
Speaker #1: Yes. So
Speaker #1: see, the steepest drop in terms of percentage reduction has come in the less than four majority. But so is the case for the higher SUVs also.
Speaker #1: So actually, the traction is therefore across the board that we are seeing also there have been new launches also. So in certain segments, there is a traction coming because of that also.
Speaker #1: But as I said, that I think compact SUV segment and also the sub-compact SUV segment where the price drops have been also but also absolute significant, not only in terms of percentage, value.
Speaker #1: We are seeing greater traction. And that's the reason you have, as I was speaking about punch and Nexon, having done significant retails. In September and October, clearly indicates that these two segments have been quite strong beneficiaries of this.
Speaker #1: This introduction of GST
Speaker #1: 2.0. Thank
Speaker #2: You, coming to India EVs, I mean, demand is to you. What percentage of EV revenues are eligible for PLI currently? And is there a combined upper limit for that ?6,300 crores of PLI over five years for PV plus TV, or can they claim separately?
Speaker #1: Yes, so right now, we are accruing PLI only on three of our products: Tiago, Tekar, Fleet, and Punch. Cumulatively, they only contribute to 30% of our volumes.
Speaker #1: Bulk of our portfolio, which is Nexon and Harriet.EV, as I previously mentioned, we start accruing in Q3 and Q4. In terms of our humidity cap, the 6,000,500 crore cumulative cap is there.
Speaker #1: We'll apply to the passenger vehicle business and the commercial vehicle business together. Because we had applied originally in 2021 as a group.
Speaker #2: Okay. Staying with you on PLI for a minute. What percentage of the EV volumes in the second quarter qualified for PLI, and would the third quarter have the full EV?
Speaker #2: portfolio enjoying it?
Speaker #1: So by
Speaker #1: As I mentioned, in Q2, 30% of our volumes qualified for the PLI. In Q3, we have Nexon EV also qualified. We should probably add another 25% of our volumes.
Speaker #1: And Harriet.EV will follow through in Q4. That would only mean that curve will not come under PLI because it's manufactured outside in our joint venture and does not come under the PLI segment.
Speaker #2: Yeah. And again, when I say Morgan, they went to you. Other businesses, ex-India PV and JLR, had a PBT of ?389 crores. Can you give a breakup of this?
Speaker #2: We want to take it
Speaker #2: Offline. Let's take it offline. We can take it offline. But then we'll reach out to you.
Speaker #1: Yeah.
Speaker #2: Richard coming your way, I think you already covered this from Dinesh Gandhi. Do you expect the further cyber incident cost? You already covered that.
Speaker #2: Where do you expect depreciation to settle? And when do you expect it to start rising as the new product?
Speaker #2: launches? Okay.
Speaker #1: I'm just reading the other ones. Okay. So I expect depreciation to settle roughly where it is at the moment. And obviously, it will start rising when the new products start launching.
Speaker #1: The first of the new products will still be the Range Rover Path, and that will be next year. So, until that point in time, it will stay where it is.
Speaker #1: And then it will tick progressively up as our new vehicles launch. And then, while production in general is normalizing, next period—okay, so next period—I think the political tension seems to be dissipating.
Speaker #1: So the China authorities have opened up exports to auto manufacturers. So that's generally good news. And I think that we should welcome it. I don't think it's necessarily the end of the issue.
Speaker #1: Because you have to look at next period's value chain. What they actually do is produce the wafers in Germany, ship them to China for processing, and then export them from China.
Speaker #1: So during the period where they have had this power struggle, those shipments from Germany haven't necessarily occurred. And I think they ship about 8 billion wafers a year out of Germany.
Speaker #1: So it is more than possible that there will still be a supply hole as their value stream adjusts. We haven't seen it yet, but I am fearful of it.
Speaker #1: So we are keeping very aggressive in the market to make sure that we can find alternative chip sources just in case that happens. So generally positive, but I would say we are not out of the woods on the next period yet.
Speaker #1: And I think I've answered the last question around this.
Speaker #2: Yes, you have. And this is the next period impact on PV here?
Speaker #1: Yes. So immediate impact, we don't see. We have also been mapping our exposure to next period on different components. No immediate exposure, but we are watching very closely.
Speaker #1: We are taking alternative actions to see that our impact is less if there is going to be a real issue continuing with next period.
Speaker #2: Okay. Devon, maybe I'll get this question on to you. In terms of margins of the PV business, can you talk about how do you reach a double-digit EBITDA margin in our ICE PV portfolio?
Speaker #2: Is there a scope into margins on existing products? Or we expect profitability improvement only because of new
Speaker #2: launches?
Speaker #1: No, it could be a combination of.
Speaker #1: both. Not too long back, in FY24, we were at a 9% EBITDA margin. The last two years, it has been a tough operating environment given that our portfolio was largely less than 10 meters and less than 4 meters, which saw the maximum amount of stress and also discounting.
Speaker #1: We have lost value in terms of adverse realization coming through the last two years. The commodity hit has also been fairly high this year, for which we have not been able to take a price increase.
Speaker #1: So we should see a reversal of that next fiscal. There is a strong cost reduction program that we run, which gives us anywhere between 1% to 2% year-on-year benefit every year.
Speaker #1: It's just not visible because of all the other losses that we've got. CRR should then make it more positive starting Q4. So definitely, we have a pathway to a double-digit EBITDA margin.
Speaker #2: Okay, thank you. I think there's one question on Agritas that's coming in, which probably I'll take. This is from Chhatramoli Gurman. Could you share an update on the cell manufacturing plants in India and Europe?
Speaker #2: Any timelines here? I think the timeline that they originally indicated, Shailesh Chandra, continues. So by the end of next year, you would want to expect a stand-up India first.
Speaker #2: And followed by Europe, there is the UK soon thereafter. So timelines, obviously, they are running ahead against the clock on this one. It is stressed.
Speaker #2: But we'll do our best to reach there. On the rarer supply situation, Shellish, would you want to pick up the pizza?
Speaker #1: Yeah. So on the rarer we had taken several actions. As alternatives, to ensure that this does not become a disruption for us. So initially, it started with securing inventories and all, but later on, we also found alternatives.
Speaker #1: In terms of substituting the high rare earth in certain components, and we continue to do that in terms of exploring eventually to be high rare earth-free.
Speaker #1: In many cases, there are multiple initiatives that we have undertaken, but we don't see any exposure as far as rare earth situations.
Speaker #2: So, staying with you after the GSC cut us from a couple, after the GSC cut, is there a rise in first-time buyers? How much is, how are the numbers?
Speaker #1: So frankly, I would not have specific data on this. But there has not been a significant change in the percentage of first-time buyers so far.
Speaker #1: And remember that typically, we see consideration to retail cycle of 60 days. So we still need to get those new customers who are not thinking of buying a car.
Speaker #1: It will take them 60 days to really start really getting access or delivery of the car. Because they would have started considering after, say, 5th September.
Speaker #1: So still that part is going to play out. Right now, what we have seen is that all the customers were already thought of buying a car were inquiring about cars.
Speaker #1: They have found this opportunity to either upgrade themselves to a higher segment car or a higher trim. So that's seen. But not a significant change I've seen in terms of percentage of first-time buyers.
Speaker #1: the feature that we have I have to again relook at it if there is any change that I see in the data
Speaker #1: I'm getting. We also then talked
Speaker #2: does the new draft have a lower credit for EVs? about café norms. And why
Speaker #1: So see, as CM, we have already represented to keep it at a level of gold. Possibly the current proposal would have just carried forward by default what was in Café 2.
Speaker #1: representation has So the gone. Asking for higher super credit for EVs. Given the extent of investments that we have to do in EVs as compared to any other alternative technologies, and the ecosystem challenges that we have.
Speaker #1: So there's already a proposal which has gone to be.
Speaker #2: Thank you. I think with this, we come to the end of the you all of you for. For the probing questions. It's fair to say Q&A session also. a difficult quarter.
Speaker #2: Thank you. I think with this, we come to the end of the you all of you for. For the probing questions. It's fair to say Q&A session also.
Speaker #2: quarter that will ensure that we learn from what we have gone through and then bounce back harder. So thank you for that. And look forward to continuing to engage with you.