Categories Concall Highlights, Earnings, Industrials

Tata Motors Ltd Q3 FY22 Earnings Conference Call Insights

Key highlights from Tata Motors Ltd (TATAMOTORS) Q3 FY22 Earnings Concall

Management Update:

  • The company said in JLR, chip supplies have started to improve with production up 41% from previous quarter and order bank currently stands at 155,000.
  • On the passenger and EVs, the market share increased to 13% and EV is nearing about 6% of the portfolio from 2% a year ago. EV sales touched the new peak of 5,500 units and in 3Q, the company had 93% market share.
  • TATAMOTORS commented that semiconductor remains a big problem, while it is improving in 4Q compared to 2Q to 3Q, but cannot still unleash the full demand potential.

Q&A Highlights:

  • Jay Kale from Elara Capital asked that to secure better chip supplies going forward, especially with the onset of EVs at JLR, has there been any meaningful cost increase that JLR has committed to the suppliers. Adrian Mardell answered that with tension in demand/supply globally speaking, there are some price tension as well. However, the main issue is the availability of chips.
  • Ronak Sarda from Systematics asked about how and when does the company see the M&HCV demand recovering in FY23-24. Girish Wagh ED answered that freight utilization and rate has gone up towards the end of 3Q. But on total industry volume, it is going to be less than 40% of the peak. Next year, while there will be some double digit growth, it’s still going to be a portion of what the TIV was in the peak year FY19. Therefore, overall the industry is still far away from the peak that’s been achieved.
  • Satyam Thakur of Credit Suisse queried that CV margins don’t seem to have improved sequentially in 3Q despite higher volumes and some price hikes, and have discounts in CV continue to go up in Q3. Girish Wagh ED answered that while volumes are increasing over previous year, it’s still far away from the peak. Secondly, the price increases taken by the company is trailing the commodity increases and price increase have been gradually passed on into the market month over month within a quarter.
  • Jinesh Gandhi questioned if the company is seeing any signs of single and small fleet operators coming back and expectation of chip supplies for CVs and PVs in Q4.  Girish Wagh ED answered that the customer mix is currently skewed towards larger accounts, but there is a sign of retail/small customer coming back to market gradually. On the chip shortage, the company said it continues to face shortages, especially in the small CV segment, but with its efforts TATAMOTORS has been able to secure its supplies in 4Q for medium, heavy, intermediate and light vehicles.
  • An analyst asked if the company is planning to launch PV in the hybrid space, if the demand for it is strong in the next 3-4 years and what’s the lead time. Shailesh Chandra, President answered that the company is seeing this space mainly as a compliance of CAFE norms space. However, the company wants to focus on tech which will not only meet the CAFE requirement but also that will lead the charge for zero emission technology. This is the reason the company has taken a conscious call of focusing on EVs.
  •  An analyst asked which customer profile does the company sees CNG picking up and the mix between petrol, diesel, CNG and EVs going forward.  Shailesh Chandra, President replied that with the enforcement of BS VI norms, diesel became less viable in the entry segment. Therefore, less than 8 lakhs segment is the profile segment for CNG. On the mix, the company will exit FY22 at about 65-66% of petrol; diesel 15%, CNG 10-12% and EVs 7%. In the next 3-5 years, petrol will come down to about 50%, CNG go up to 20%, diesel to about 10% and EV to 20%.
  • Sandeep Verma asked on the CVs space that is the gain in market share due to CNG based sales of LCV segment. Girish Wagh ED said the share gain has been across segments. In M&HCV there is no CNG penetration. In ILCV there is 45% penetration. On below LCV, the company looks at market in two subsegments; small commercial vehicle and pickups. Pickup is about 60% of total segment and in pickup there is no CNG offering. In small commercial vehicle, the penetration is around 33%.
  • Binay Singh Morgan Stanley asked that global OEMs are highlighting software sales as a revenue opportunity in the long run and how does JLR see this opportunity. Adrian Mardell answered that the company is seeing an increase in software revenue and also going forward the company is seeing it as an enabler and has already launched its in-control renewals, fleet telematics and making the best of software over the air to improve services.

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