Tata Motors posts wider-than-expected Q3 loss; JLR expects chip shortage to continue

Tata Motors posted a wider-than-expected loss for the quarter ended December 31 and a decline in revenue due to chip shortages even though demand improved compared with the previous quarter.

The firm posted a net loss of Rs 1,516 crore during the third quarter compared with a net profit of Rs 2,906 crore in the same quarter the previous year.

While this was much lower than the loss of Rs 4,441 crore in the quarter ended September 30, as expected, it was still much higher than consensus estimates that had a forecast of net loss of around Rs 1,000 crore.

Consolidated net revenue came at Rs 72,229 crore, down 4.5% from Q3 FY21 but up 17.7% sequentially over Q2 FY22. This was in line with expectations.

Jaguar Land Rover (JLR) revenue came at £4.7 billion, down 21.2%. Commercial vehicle revenue was up 28.7% while passenger vehicle revenue jumped 72.3%.

The company said its India operations showed significant revenue improvement from a year ago. However, commodity inflation impacted its margins. The passenger vehicles business continued its turnaround journey and strengthened its double-digit market share with highest sales in any calendar year since inception.

The company’s share price, which has shot up over 60% in the last four months, climbed 4% in a strong Mumbai market on Monday and was quoting at Rs 517.5 a share at the close of trade. The company declared its financials for the period after trading stopped for the day.

Other Key Highlights

1) Consolidated EBITDA margin stood at 10.2%, down by 460 basis points; EBIT at 1.7%, down 470 basis points.

2) JLR sales remain constrained by chip shortages with retail sales of 80,126 vehicles, down 37.6% over Q3 FY21.

3) JLR’s EBIT margin was 1.4% and free cash flow was positive at £164 million in Q3.

4) EV sales touched a new peak of 5,592 units in Q3 FY22.

Management commentary and outlook

The company said demand remains strong despite near-term concerns from the spread of Omicron variant of coronavirus. It said that the semiconductor supply situation is improving gradually but inflation worries persist. It expects performance to improve further in the fourth quarter and beyond.

Girish Wagh, Executive Director at Tata Motors, said the auto industry continued to witness rising demand in most segments even as the supply of semiconductors remained restricted resulting in adverse impact on production.

“We continue to increase market share in every segment of commercial vehicles and set several new milestones in passenger vehicles with decade high sales for both the quarter as well as the calendar year 2021. We also recorded the highest ever EV sales during the quarter and sold 10,000 EVs in 9MFY22, crossing new milestones,” he said.

Looking ahead, he said, the company expects demand for commercial, passenger and electric vehicles to sustain even as concerns related to supply of semiconductors, high input costs and rising instances of Covid-19 keep the overall situation fluid.

“We will remain agile, address supply bottlenecks proactively, drive our savings program harder, take prudent pricing actions while continuing to make good progress in our future-fit initiatives of transforming customer experience digitally and strengthening our lead in sustainable mobility.”

Thierry Bolloré, Jaguar Land Rover’s CEO, said that while semiconductor supplies continued to constrain sales this quarter, it sees “very strong demand” for its products underlining the desirability of its vehicles.

“The global order book is at record levels and has grown an incredible 30,000 units for the new Range Rover before deliveries even start this quarter,” he said.