Tata Motors Ltd (NSE: TATAMOTORS) Q4 2025 Earnings Call dated May. 13, 2025
Corporate Participants:
P.B. Balaji — Group Chief Financial Officer
Richard Molyneux — Chief Financial Officer, Jaguar Land Rover
G.V. Ramanan — Vice President, Finance
Girish Wagh — Executive Director
Dhiman Gupta — Vice President, Finance, Tata Motors Passenger Vehicles Limited & Tata Passenger Electric Mobility L
Shailesh Chandra — Managing Director Tata Motors Passenger Vehicles Limited & Tata Passenger Electric Mobility Limited
Presentation:
Operator
Good day, and welcome to Tata Motors Q4 FY25 Earnings call. Today with us are Mr. P.B. Balaji Group CFO, Tata Motors, Mr. Girish Wagh, Executive Director, Tata Motors, Mr. Shailesh Chandra, MD, Tata Motors Passenger Vehicles Limited and Tata Passenger Electric Mobility Limited. Mr. G.V. Ramanan, Vice President Finance, Tata Motors Ltd, Mr. Dhiman Gupta, Vice President Finance, Limited and Tata Passenger Electric Mobility Limited. Mr. Adrian Mardell, CEO, Jaguar Land Rover, Mr. Richard Molyneux, CFO, Jaguar Land Rover. And we also have our colleagues from the Investor Relations team. Today we plan to walk you through the results presentation followed by Q&A.
As a reminder, all participants will be in listen only mode and we will be taking questions via the team’s platform. The same is already open for you to submit the questions. You are requested to mention your name and the name of organization while submitting the questions. I now hand over to Balaji sir to take over. Over to you sir.
P.B. Balaji — Group Chief Financial Officer
Thank you, Anish. Standard Safe Harbor Slide. The only difference you will notice going forward would be Tata Motors Finance is no more a subsidiary of Tata Motors. Tata Motors Finance Holdings still is but the NDFC is no more that’s been merged with Tata Capital. So I’m going to talk about the implications of that in the coming slides. Next slide please. Overall it’s been a action packed year, and both here and in JLR, those of us who are there at Auto Expo in Delhi earlier this year you saw the full impact of the 11 CVs that were launched, as well as you saw the car the Sierra being unveiled there is probably the standout car of the as far as the auto exports concerned.
Also we saw the new avenue there as well. We started also shipping our first hydrogen truck almost which are now going to apply on specific lanes. I’m sure excited Girish is going to talk about it in his session. And lastly but not the least Punch emerged as a top choice for private buyers to become India’s number one SUV in FY25. A humongous achievement there. Next slide please. As far as JLR, it’s been a absolutely wonderful year coming out of JLR. The net cash positive target has been achieved. We delivered what we committed to our guidance, despite extremely challenging situations elsewhere.
The Freelander licensing agreement has been announced for CJLR. Range Rover electric testing continues soon to be launched, and of course Jaguar Type 00. Who else? I mean what can you say about it other than the head turner that it was. And Defender Octa is now starting to get delivered to its clients. One more blockbuster vehicle coming away. Next slide Please. An overall numbers basis for the quarter it was a INR119,000 crores with an EBITDA of INR16,700 crores and an auto FCF of INR19,400 crores. This is our highest ever revenue in as far as FY.
This financial year we delivered our highest ever revenues. We also delivered our highest ever PBT before exceptional item. And Q4 is always a strong quarter, so we did see a sequential recovery and of course we did get aided by the INR depreciation, vis-a-vis form. On a profitability line, significant interest savings. I’m going to talk about it in a minute. Better CV profitability, lower DNA and JLR, these were the main ones that drove the profitability up. But the underlying profitability continued to remain very healthy, and free cash flows came in at INR19,400 crores.
On a full year basis we have delivered very strong FCF of almost INR50,000 crores over the last two years. Thereby delivering our deleveraging commitment. Next slide please. Where did the growth come from? It is there for all you to see but I’ll draw your attention to the net debt number. While we entered — we ended FY23 at INR43,000 crores. The peak debt this business had was almost INR60,000 crores. That’s now down to minus INR1,000 crores. A cash of INR1,000 despite external leases of almost INR9. I mean financial leases of INR9,000 crores. So this is a very strong performance, and this is translating into reduction in net finance cost.
And why I’m harking on that point is that intrinsically business is becoming far more resilient as it takes away debt,and it is able to now have more leverage leeway to take on the headwinds that come our way. Next slide please. On the corporate actions slide. I’m going to come in a minute, but before that these charts tell you the performance over a long period. FY10 to FY25 each of the data points in five year intervals. I just chose some five year intervals for this. A record high revenue, Almost record high EBITDA of almost INR57,000 crores.
A record high PBT of INR34,000 crores. And investment — we did our highest ever investment of INR48,000 crores, and despite that generated an FCF of almost INR22,000 crores resulting in a debt going down to minus INR1000 crores. And all this done with a very strong ROCE of 17.6%. And this business has come a long long way from what it was in its turbulent times. And therefore a huge call out and a huge thanks to every one of the people who have been working tirelessly in this business, to deliver this set of graphs. Next slide please.
And this of course is translating into credit ratings again 2 notches upgrade we received this year, and we hope to get more as we go forward. Next slide please. The final dividend. If you recollect last year we had a INR3 ordinary dividend and we had a INR3 special dividend. Delighted to say this year we’ve gone in with a final ordinary dividend of INR6 per share. Total same as last year, but all of this is now final ordinary dividend. 300% of face value and obviously this will have to be approved in the ensuing shareholders meeting.
The demerger update. We had an overwhelming votes in our favor, and therefore we are on track for an appointed date of July 1st and an effective date of October 1st. This year we also had the PLI benefit. These are the updates that you see. Total for the year is almost INR500 crores of PLI benefits have been secured. This out of which INR142 crores we had it in the last quarter for FY24 and this quarter for the rest of FY25 we got about INR385 crores and the implications of margins are there. Next slide. Just to take a minute on the Tata Motors Finance merger that has just been concluded.
This will have an given that it is a financing company, therefore it earns before interest and its costs are below interest below EBIT and therefore that’s why you see a 50 bps delta that is there. At the same time there’s significant shift in the liabilities line and the finance receivables line, where the balance sheet you’ll see almost a INR30,000 crore shift in finance receivables, and the borrowing is also down by almost INR31,000 crores gross borrowings. So significant shifts in the balance sheet because of this which makes this business less risky as we go forward. Next slide.
Let me now hand this over to Richard to take us through the JLR performance. Richard, over to you.
Richard Molyneux — Chief Financial Officer, Jaguar Land Rover
Can you hear me?
P.B. Balaji — Group Chief Financial Officer
Yes, we can. Go ahead.
Richard Molyneux — Chief Financial Officer, Jaguar Land Rover
Right, so this chart summarises our financial results for the full year on the right and for the quarter in the middle. Volumes and revenue were relatively flat over both periods. EBIT was 10.7% in the quarter and just over 8.5% full year aligned with our guidance. EBIT for the quarter at GBP875 million was the highest quarterly PBT we delivered in nine years and drove full year PBT to GBP2.5 billion. Cash flow GBP1.35 billion in the quarter allowed us to end the year GBP278 million net cash. So our other main piece of guidance delivered. The main care point that I will refer to on later charts is however EBITDA, which fell 1% QoQ and 1.6% year-over-year.
So to the next chart. As per usual, I’ll skip over this chart as I’ll cover all the messages as we go through the pack. The key data is however, here for your reference. Okay, so in terms of wholesales, wholesales in the quarter were flat 110,000 units to 111,000 units and for the full year also at 401,000 units. In this chart and in the next chart, Q4 will be at the top, FY25 at the bottom. And because the full year and the quarter in this particular case say the same story, I’ll just refer to the bottom section of the chart.
As we are ceasing the production of the legacy Jaguars, Jaguar volume essentially halved year-over-year from 50,000 units to 27,000 units. With that volume moving into Defender and Range Rover. Defender had yet another record year over 115,000 units. That again is the highest number of Defenders we have ever sold since 1947 when the car started. And we also increased volume on Range Rover, Range Rover Sport and Evoque, which drove’s the Range Rover brand sales to 225,000 units, up 12% year-over-year. Next chart. So regionally, looking at Q4 data, first, the top half of the page. Our recovery in the UK continues from a couple of difficult quarters, closing the year flat versus FY24.
Europe has been robust for us, up 12% quarter-over-quarter, although on a full year basis we’re down 9,000 units, most of which is the effect of legacy Jaguar cars being removed from sale. China remains a very challenging market, not just for us, and sales were down from 13,000 to 9,000 in the quarter as we adjusted down our days supply stock levels at the retailers. So our days supply stock levels ended the year both below Q3 and below the end of FY24 levels. And that is to protect the quality of our sales going forward. The overseas region was down both quarter and on a full year basis.
Although this is from an absolutely stellar FY24, if you look at the full year numbers of FY25 of 70,000 units or 70.5 thousand units, actually that year is 21% higher than FY23 and 40% higher than FY22. So we’ve been on a real steep increase in overseas. Just come back a little bit in FY25. I skipped one market. You may have noticed the biggest market for us now is North America. 34% of our wholesales in the quarter and 32% full year. This reflects really strong affinity with both the Range Rover and Defender brands. We did push hard in Q4 as we feared tariffs were coming, but that shouldn’t mask the underlying success of our North American business in recent years.
Next page. So this chart shows the walk of PBT from the same quarter last year when we earned GBP661 million to this quarter’s GBP875 million. Volume and mix were relatively flat, fewer low margin Jaguars but also a lower mix of China cars. We had increased emissions costs and royalties from our China JV fell as local cars get towards their end of life. Net pricing was adverse. VME at 5% versus the 2.6% a year ago and only about half of that effect was offset by variable cost improvements. We did have a big pickup in structural costs, particularly DNA being favourable GBP200 million versus last year.
Over half of this is the cessation of Jaguar production at both Graz and CB and the associated amortization of the vehicles that were built there. The rest is largely due to the extension of our ICE portfolio as we adjust to global BEV demand. FX and commodities largely moved favorably for us. Sterling was weaker than Q4 last year on average helping operational FX but actually dollar weakness took over towards the end allowing our balance sheet reval to also being positive. Again on this chart you can still see the main challenge for us is EBITDA and much of our transformation efforts I’ll cover later in this presentation are in this space.
Next page. Now, on a full year basis taking PBT through to cash. Cash profit after tax remains strong at GBP4.5 billion or equivalent to about GBP11,300 per car. This is slightly down on last year reflecting the contribution profit walk on the prior page. Investment did come in on forecast at GBP3.8 billion just a touch below giving free cash flow before working capital of GBP735 million. Working capital was strongly positive as we optimised to reach our net cash target in receivables and in inventory. A big element of other there you can see in the text that is largely the working capital favorable effect we get through warranty and emissions.
Next page. So from a perspective of investment it fell in Q4 allowing us to come in just below GBP3.8 billion of our engineering we capitalized 67% for the year. This is to be expected as most of our engineers are working on cars that are relatively near the end of their development cycle. Next chart. So one of my favorite charts. This shows the cash journey over the last three years from a net debt position of GBP3.2 billion at the end of FY22 to GBP0.3 billion net cash now. You can also see we’ve generally kept cash levels relatively stable to run the business.
Though do note that with the tariff uncertainties pending at the end of last year, we deliberately ensured that our most recent cash levels were at the highest end of our range. So we ended the year with GBP4.634 billion worth of cash. And that was deliberate given the uncertainties that we faced in the market. Right? Moving to the future. Next page. I’ve managed to get through all of this without saying tariffs yet. So tariffs, It’s certainly been a journey over the last couple of months, and a journey that probably still has not reached its end. We welcome the deal between the UK and the US governments that addresses the 25% sectoral tariffs suddenly imposed on Automotive sectors, but also on steel and aluminium.
And it brings the Automotive sector in line with the other UK businesses in paying a circa 10% tariff on shipments to the US. We’re working through the detail. We continue to offer the government our support and we’ll also support efforts at a EU level to address EU US tariffs, which do impact our Defender and our Discovery product exported from our Slovakia plant to the US. Where we stand today is that we’ll pay tariffs. Sorry, we’ll pay a 300% increase on the tariffs we used to pay in the UK, so going from 2.5% to 10%. We also pay 1,000% increase on the prior tariffs on Defender and Discovery out of our EU plant.
On top of this, China’s going to remain difficult and our high investment in future products will continue. So we need to react. Business as usual will not work in FY26 and ’27, so we’ve launched a series of special focus programs or missions to protect EBIT from the threats of tariffs and the other threats that we face. Next page. Below are some of these transformation missions, some of those we have set up, some of them we’ll go through in more detail at Investor Day. We know we have to drive ex-works costs down through technical changes, commercial negotiations with suppliers, and content rebalancing.
Together we spend GBP16 billion a year in this area, so we are systematically with cross functioning teams identifying opportunities in every area of the car. There were 160 people in a meeting room next to me earlier on today, doing precisely that in squads by area of the car. We also know we need to do more to tackle our warranty costs, better quality delivery, and a faster response when issues are found for example. Customer love is the third one. You might be surprised to find that on the list. But it’s crucial to improving our customer loyalty. Along with the warranty issue and customer loyalty, brand loyalty is a crucial value driver.
So customer love is really important. China resilience we’ve spoken about several times. We now have dedicated teams looking at regulations by market to optimize any emissions liabilities that we have. These are just examples. There are more and we’ll share more detail on Investor Day. Next page. We built a history of meeting our promises, delivering on our guidance, but the economic fabric of our global industry is in flux so it will be inappropriate for us now to give firm earnings guidance for FY26 today, less than a week after the framework of a US, UK trade deal was announced.
We’ll see you again at our Investor Day on 16th of June and give you an update then. But what I will say now however, is that our GBP18 billion investment programme over five years remains in place. It has to drive our business forward, and that we’ll commit to find that GBP18 billion with operating cash rather than just five year period. So we’ll give you more information at Investor Day. You now have even more of a reason to attend, so I look forward to seeing you then and in the meantime I’ll hand you back to Balaji.
P.B. Balaji — Group Chief Financial Officer
Thanks Richard. Let me now move to the Commercial Vehicles business. Girish Ramanan, would you want to take the lead on this?
G.V. Ramanan — Vice President, Finance
Thank you Balaji. Next slide. Our domestic Vahan market share stands at 37.1%. When we look at the market share by product line, Trucks are holding on to their market share and passenger is coming back with 100 bps improvement in market share. Both trucks and passengers have performed better than the industry. SME Market share has come down and this is an issue. Next slide please. On the financial performance the business has consistently delivered double digit EBITDA margins quarter-on-quarter, and has delivered an EBITDA of around 12.2% and an EBIT of 9.7% in Q4 FY25. This is an improvement of 20 bps and 10 bps respectively over Q4 last year.
On a full year basis EBITDA was marginally lower than 12% and EBIT was at 9.1% driven by better realization and cost saving. This is an improvement of 100 bps and 90 bps respectively over FY24 on a full year basis. The business delivered the highest ever PBT of INR6,600 crores and a strong ROCE of 37.7%. Overall, a very strong financial performance. Coming to the EBITDA. Next slide please. This is a comparison of the PBT from Q4 ’24 to Q4 ’25. Mix optimization and realization improvements have been the key drivers. There’s been a slight increase in fixed cost overall a 10 bps improvement in EBIT over the same time last year. With this I now hand this over to Girish for the industry insights and business highlights.
Girish Wagh — Executive Director
Thank you Ramanan. So, the total industry volume improved marginally in Q4 on a YoY basis, and just to give you a perspective, you will recollect that in quarter two the industry had shown a significant double digit decline on a YoY basis. This decline reduced in Q3 and therefore it was a single digit decline. And now in Q4 the TIV has been either flat or slightly growing over the previous year which is actually a good sign. Average utilization in trucks and buses has grown quarter-on-quarter and the transporter profitability has also improved marginally. We see that the freight rates have improved in Q4 by around 1% to 2% which is supported by better utilization due to stronger commodity movement, stable agri sentiments, seasonal demand for white goods has also improved infra and mining activity.
The customer sentiment index which we measure quarterly internally, it indicates that Tipper sentiment index has improved marginally which indicates good mining and infra activity. On the other hand, heavy commercial vehicle, cargo and intermediate light medium commercial vehicle as well as SUV Pickup the sentiment index has almost remained flat. Commodity prices in the quarter gone by remained rangebound. We are now looking at an impact due to the steel safeguarding duty which has been already implemented. So we are assessing the impact and should be there in maybe few weeks time.
Going next, on the vehicle business in quarter four as I said, the industry volumes improved, compared with the decline in earlier quarters this is a good sign. In Tata Motors, both buses and trucks registered a healthy growth in Q4. Digital selling which is something that we have been pushing for. I think the contribution to retail in terms of leads generated is now almost 27%, and has been increasing quarter-on-quarter. On 8th of June the entire truck portfolio, both cabin and cowl is supposed to undergo change over to AC regulation. This is a manufacturing date transition, and we are getting ready for the entire portfolio to move towards AC fitment.
In Electric Mobility.In Q4 we delivered 89 electric buses. So this is now towards the tail end of the first CSL tender that we had won. We now have more than 3,600 electric buses on the road. We also started supply in private accounts, first few buses being delivered. On small commercial vehicles Ace now we have more than 8,000 electric vehicles flying on the roads. And in Q4 we saw expansion in some of the new segments like milk and LPG. We also won multiple bulk deals and municipal deals in quarter four. Our overall sustainability targets are on track for decarbonization as well as circularity.
In the smart city mobility busines, as I said, our feet now has crossed more than 310 million kilometers, and consistently delivering more than 95% of time. Out of these 3,600 we have 2,500 buses in Delhi, Bangalore and Jammu and Srinagar. Deployment has been completed in Jammu Kashmir, Bangalore and Delhi and from Bangalore we also have an additional order of around 148 buses. As I said, I think we have been consistently delivering performance about the contractual terms, and we’ve also entered into the staff transportation segment. Although within the group right now we are also discussing with few other companies outside the group.
Next, in our digital business Fleet Edge now has almost 800,000 active vehicles with monthly active usage of 81% and weekly active usage of around 59%. I think apart from delivering uptime related services we are also delivering the machine learning based insights to improve fuel efficiency in real life. Solution is named as Mileage Sarathi and we are able to deliver around 5.5% to 6.3% real life fuel efficiency improvement on more than 11,000 vehicles. E-Dukaan which is our digital parts stores is now made open for all B2B users. B2B is our distributors who then supply to the retail channel, and also some of the key customers.
So significant portion of our retail channel now actually is ordered through this digital stores. Freight Tiger in which we have taken a stake is now available for tracking all the shipments on E-Dukaan which along with our logistics partnerships is helping us to achieve a very high on time in full delivery and therefore ensuring there is no loss of sale. Fleet Verse which is our digital front for selling vehicles, we now have more than 13,000 vehicles being sold with enquiries coming directly onto the Fleet Verse platform. So that’s about the digital business. Going ahead for FY26, I think overall level the macro indicators are on track.
As I said the fleet utilizations are improving, the sentiment index is stable, and therefore we anticipate sustained growth despite global headwinds. And also there have been local headwinds in past two weeks. I think our focus will be on first of all ensuring smooth transition of AC regulation for trucks. And as has been our past practice, all these trucks will come up with value enhancements and not just introduction of AC. We continue to invest in future technology, and new products, especially in alternate fuels, model years or value enhancements. We continue to expand for product portfolio, have smart digital solutions and we’ll also have some new nameplate launches coming up in the year.
In SCV Pickup very clearly I think the task is cut out for us to increase our market share, regain the market share that we lost, and I think there are two things that we are focusing on. One is launching Ace Pro in quarter two which will enable us to get into the lower end of the small commercial vehicle segment which otherwise has been using salience in this industry. And at the same time post the launch of entire Intra Gold series, we are now having an integrated plan of ATL Digital BTL to increase consideration of this brand. And finally, of course we will continue to deliver strong double digit EBITDA margins, cash flows and also strong return on capital employed which Ramanan also touched upon earlier.
With this Balaji, back to you.
P.B. Balaji — Group Chief Financial Officer
Thanks Girish. Can I now hand it over to Shailesh and Dhiman? Dhiman?
Dhiman Gupta — Vice President, Finance, Tata Motors Passenger Vehicles Limited & Tata Passenger Electric Mobility L
Yeah. Thank you Balaji, and good evening everyone. We closed the year with a Vahan market share at 13.2%. While our SUV[Phonetic] portfolio outperformed the industry, we had some losses in our Hatch portfolio resulting in an overall market share decline on a year-on-year basis. Shailesh is obviously going to touch upon, all the actions that we are taking on our Hatch portfolio in our subsequent slides. So I’ll park it for now. In terms of powertrain mix, Diesel continues to be steady at 13%. Significant traction in our CNG portfolio where we have grown 60% year-on-year, our CNG plus EV penetration at 36% and CAFE well below the target threshold.
Moving on to EVs. Ashish, next slide please. Moving on to EVs, our overall volume for the year was down 13% largely on part due to the muted traction we had on the fleet side. The industry has grown by 20% this year largely on the back office spurt of new launches from H2 onwards. We ended the year with a 55% market share, near term market share there might be some noise as the initial launch activity settled down, and our launches in the INR20 lakh price segment as well as the entire enhancement we are doing on our existing product portfolio kind of flows in through the rest of the year.
Next slide please. A difficulty in terms of profitability on account of the muted industry growth that we saw, periods of high dealer inventory and adverse realization, the bright spot was the PLI incentives that we’ve started accruing from last quarter. We now have three of our products TCA certified on which we have accrued INR350 crore of PLI incentives this year. Our PBT for the year stood at about INR700 crores, a INR300 crores decline from last year. Next slide please.
EBITDA margin for ICE business for FY25 was 8.1% about 1 percentage point lower than last year. Recovery of margin on the back of cost reductions, better mix and operating leverage through the rest of the next four quarters will be a key focus for us next year. A key call out for our EV business Despite the significant investments we continue to make in market expansion and our product investments and the price benefits that we have passed on to the customers for lower battery cost for the year, the business ended with both EBITDA and PBT positive. Next slide. Shailesh, over to you.
Shailesh Chandra — Managing Director Tata Motors Passenger Vehicles Limited & Tata Passenger Electric Mobility Limited
Yeah, thank you Dhiman. Let me first start with the industry highlights. So FY25 was, growth moderated to 4.3 million units and it was a modest 2% growth over FY24. We had seen stress in the macro economy also and it had its reflection also in the car industry where the growth remained muted, and we also saw that it was a very discount driven market across all the OEMs. We also witnessed a segmental shifts and it further strengthened in favor of SUVs which saw 11% year-on-year growth and the salience increased to 55% while hatches and sedans degrew by 12% year-on-year.
CNG has been rocking for last few years and this has seen 30% year-on-year growth despite a 2% growth for the industry, and it is also reflecting the growing preference among the personal segment customers also as the CG network across the country has been increasing. Neiman already mentioned about EVs that there was a muted situation in H1 in terms of growth, but in the second half of the year with greater participation of various OEMs and the new launches, we did see traction coming back on the EV side which is auguring well for the growth in FY26. As far as we are concerned it has been a year of hits and misses.
On the hit side, we clearly saw that in SUV segment, on the back of strong demand for Punch, which was the number one model in 2024 and the launch of Curvv, we had an industry beating growth. In the CNG segment which has been growing at a rate of 30% that in the industry at an industry level, we were the fastest growing player in this segment with 60% growth. And the twin-cylinder technology that we brought, that innovation has really helped. And also the launch of Nexon CNG has been a roaring success. So we are growing very fast in this segment.
And you have seen how the overall share of CNG in our portfolio has gone up to 25% from just 7%, 8% two years back. The big problem for us last year where we witness the decline in our volumes and market share was because of hatches, and namely two products which is Tiago and Alturas, which were in their fifth year and therefore it was very aged and that led to significant decline in our hatches volume. Having said that in quarter [Technical Issue]
P.B. Balaji — Group Chief Financial Officer
Sorry Shailesh, we seem to have lost you. Just give us a minute please. We seem to have lost Shailesh. We can’t hear you. Sorry. Just give us a minute, please. Shailesh is having some baring[Phonetic] issues. Dhiman Why don’t you step in till Shailesh joins us?
Dhiman Gupta — Vice President, Finance, Tata Motors Passenger Vehicles Limited & Tata Passenger Electric Mobility L
Yeah, I think I just carry over from what where Shailesh left. This was a year of, it was a mixed bag for us. Yeah, I think, Shailesh mentioned where I think we have the outpost, the industry growth in terms of our SUV sales, the good reception that we’ve got for Curvv and our Revariant Nexon introduced in Q4. We did lose a bit in terms of hatches, especially because of our, aging that had happened in the portfolio both for Tiago and Altroz. Part of it we’ve corrected. In Q4 we’ve introduced Tiago, the refreshed model year ’25 that has found very good traction in the market.
And a lot of you would have seen we are refreshing the Altroz. Altroz was introduced in 2021, and we haven’t refreshed it for the last four years. And we are coming up up with the mid cycle enhancement which the launch is planned shortly this month. So with both the actions, we believe some of the market share decline that we have seen through the year, we should [Technical Issues]
P.B. Balaji — Group Chief Financial Officer
Go for it. Shailesh. The last section, if you can talk about after sales and beyond.
Shailesh Chandra — Managing Director Tata Motors Passenger Vehicles Limited & Tata Passenger Electric Mobility Limited
Yeah, okay. So in FY25 it was the year of consolidation for us, and we spent some disproportionate focus in areas like after sales where we had an issue of service capacity, and we took an aggressive target in terms of bay addition, especially in the 21 hotspot cities where we were seeing customer experience really getting impacted. So we were able to really expand our presence in these 21 hotspot cities and we are very comfortable in 16 cities now. On the product quality side there were certain issues that we faced especially on the software area, and therefore we not only took initiatives to fix them fast, but also have taken significant actions on software integration aspects and the process aspect.
And I think that has been a key area of effort for us in the H2. Also the network growth and also network health had been a tremendous focus for us in the H2. Not only we increased the number of outlets by 73, but also we took series of action to ensure that the health of our network remained intact. So that was broadly in terms of the highlights of the financial year. If we go to the next slide, please, what will be the focus areas for FY26? I think we have to regain our growth momentum and drive both volumes and profitability.
FY26 as per the triangulated view that we see from various agencies and OEMs is that it is going to be moderate, pretty similar to what FY25 was. Our focus would be to deliver industry beating growth because one that possibly this year is the strongest product cycle’s for us. Freshest portfolio, so as I said that our main issue was on hatches. We have a low base of FY25. We have already a refresh which has got launched, and I talked about the growth that we have already seen in the refresh Tiago by 20%. And this month we are also launching the Altroz which saw the significant decline last year.
So both these products will be, would have got addressed from their life cycle intervention perspective. On the SUV side also we will be coming with the Multi powertrain on Harrier and Safari including the petrol version. And at the same time there will be re varianting and repositioning of certain product in the portfolio. We’ll have the full year for Nexon CNG and also we are going to launch Sierra. So even SUVs is going to be strong. So it’s a very strong year for us. On the EV side also we are going to strengthen not only the value proposition of the existing product which Dhiman talked about in terms of value price equation, but also the addition of two new products which is Harrier EV and Sierra EV.
So it’s going to be strong year for us on the EV side also. A brand consideration which got impacted last year because of customer experience issues that I already talked about. So improving customer experience, brand associations and comprehensive marketing campaigns will be the flavor of this year for us. Mainstreaming of EVs actions around ecosystem, charging infra open collaboration is what we have already spoken about in the earlier conversations also that we will also move very aggressively and we’ll focus on certain micro segments also.
So those actions, are fundamental foundational that we’ll continue to work on. Sales network I already spoke about, that this has become the focus after, a year of consolidation and the effort will be to skew our stores towards more larger formats as the portfolio is expanding, and cost reduction initiative remain critical to us to ensure competitiveness and profitability in a tough environment and this engine has been delivering well for us and this will continue.
So back to you Balaji.
P.B. Balaji — Group Chief Financial Officer
Thank you Shailesh. Let me quickly get on conclude the section. Go forward please. Overall free cash flows for the year came in at INR6,900 crores. Again this is the highest investment that we have done of almost INR8,400 crores in Tata Motors, all of which funded out of operating cash flows. Next slide please. And this is a breakup of the INR8,400 crores. Wouldn’t spend too much time on that. Go forward. So where do we see going forward? I think I’m sure the tariff is probably going to be top of mind for all of you. I can see lots of questions that have landed up which we’ll pick up.
But as an outlook I think it’s fair to say that the tariffs and the related geopolitical actions counteractions are making the operating environment uncertain and challenging. However, I think the fact that JLR is in the global premium luxury segment as well as Indian domestic market, these are expected to weather this relatively better. And you’ve seen the performance of this business over the last year many years and we have consciously strengthened our fundamentals and I believe that the business fundamentals are in fine fettle and therefore that gives us the confidence to remain focused on executing our growth strategy flawlessly, serving our customers better, and at the same time being clear of the new reality, maintain a very heightened vigil on costs and cash at the same time continuing to invest in the future.
So it’s business as usual as far as all things investments growth are concerned. And of course from a cost and cash perspective we’ll continue to keep extremely tight. So that’s the broad message I would want to leave you with. All in all, a great year the way it ended. But I believe despite all the external challenges, we are well placed to take it on. And you obviously hear more about this in greater detail in Investor Days both in Tata Motors here in Mumbai June 9th and JLR, the Investor Day is on June 16th at Gaydon.
So look forward to seeing you there and of course taking your questions now.
Questions and Answers:
P.B. Balaji
Thank you. So let me now quickly move on to questions. I’ll probably now I’ll start with Chandramouli, Goldman Sachs. There are tons of questions that have come on the UK India market situation. The fact that there is a free trade agreement that has been signed. What are the implications on the questions are from all side. What happens to volumes? What happens to pricing? What happens to the Chennai plant? Let me break this up into three. First of all, if you look at the Range Rover franchise in India, Range Rover, Range Rover Sport, Evoke, Velar, all of them are already localized manufactured on a CKD operation out of Pune already.
And therefore these cars there is no impact as far as this FDA is concerned. Therefore they won’t be changes. All the benefits in terms of CKD operations already in the price and passed on. So no changes in price expected on any of these at this point in time. However, the future cars that are going to come in the ability to access these global cars at global prices. Though it went up significantly because of this decision that has happened. Obviously we’ll have seen the fine print. There are quotas in it. There is also about a reduction over a phased period of time.
All this fine print is expected, and until such time I would only request patience from all of you till we see the fine print. We can interpret only if you see the fine print. So do bear with us on that one. Let me then move on to Shailesh. I think this is coming on EV Shailesh. What are some milestones that need to be crossed for the India EV business to reach double digit EBITDA margin? And maybe you can take all the questions. What are the rough EV makes? What happens to meeting CAFE norms? What do you see as a fair market share target? And how do you also see this changes in this FTA agreement with global competition coming in? How do you see it? Can you take all these questions in one shot? Shailesh.
Shailesh Chandra
Yeah. Thanks Balaji. So as far as EBITDA margin is concerned, we were pretty much there in quarter four of FY24, and there’s now a gap of about 2%. We exited the year at about 8.2%. Mainly see it is going to come from the cost reduction initiatives which consistently has been delivering about, 2% plus of revenues. And then it’s about optimization of pricing and VME and also the model mix which is expected to become richer with the new launches. So all this would be in combination should deliver more than, 3% or so.
But it will then get offset with some of the commodity price increases that we might see. Also with every refresh, every new model launch, we are increasing the tech and feature in the car. So those will be the offsetting, cost elements. So net net. I think we are very much on track towards 10% plus EBITDA. So that’s on question one, what is the rough EV mix, to comply to CAFE 3 norms? I think still this is under discussion, and therefore it will not be fair. But if, if you have to really go by what the government has been saying so far or BEE which is Bureau of Energy Efficiency has proposed, it would mean 10% plus EV penetration for a manufacturer like us.
And you already see that we are at 11%. So we are pretty comfortable with growth coming in for us in future and penetration aspirations being 30% plus by FY30. I think we are pretty much on track and safe. Then the question was also on what should be the fair market share in electric market once all the launches of most of the peers come through in the next 12 months. See, we are one, we are aspiring to keep our market share above 50% plus. Dhiman mentioned that there will be short term pressure because whenever a new product gets launched, typically the sales volume are 2x of the steady state volume.
So there will be most of the launches have happened recently, and it will continue. It’s a very launch action year for all the OEMs. So there will be short term volatility. But our aim, with all the actions that we are going to take, and maybe I should elaborate a bit on that. We see broadly four segments in the EV space now. One is the entry segment which is that of city cars less than INR12 lakhs. I think here we have 75% plus market share with products like Tiago and Punch. We are going to take certain actions in this space here.
The, you know, the requirement would be to come closer to the price parity with ICE and also range should be comfortable. So we will overcome some of the barriers that still remain in this segment and expand this segment where we have a very high market share. But there’s a mid segment which is also from INR12 lakh to INR20 lakh which is seeing intense competition. This is where the whole action is. There are all the manufacturers are coming with a product in this segment and therefore intensity will be high. The way of winning the game in this segment there will be short term action from our side but also more midterm which is 18 month to 24 month action to ensure that we dominate this segment also.
Rright now our market share would be about 30%, 33% in this segment. But this is the crucial segment where maximum volume would lie. And then there’s a INR20 lakh plus segment which is emerging, which is also showing great promise. And two products are going to get launched in this segment. So that will be completely additional volumes for us through Harrier EV and Sierra EV. And the fourth segment is actually fleet. Now fleet segment, so far we had addressed the issue of total cost of ownership against diesel. But there’s a big market of CNG and this is where our focus is to ensure that the value proposition of our fleet product surpasses that of CNG, and therefore this should also help us tap greater volume.
So therefore with all these actions in short term and then renewal of our portfolio with more promising product in the 18 months to 24 months, I think this should help us keep our market shares above 50% in midterm. I think short term volatility we will not be worried about. So this was on the EV side given your experience then this, this was it, right? Balaji any other question?
P.B. Balaji
Yeah, that’s correct Shailesh. Thanks a lot. Let me pass it on to Girish comment on CV. What’s your outlook for industry growth? The multiple people have asked that.
Girish Wagh
Okay, so I mean before I come to the growth the few drivers first is I think the freight rates are holding up, the utilizations are up on a YOY basis by around 2% to 5% depending upon the segment. Then as I said the sentiment index is stable and in fact gone up for tippers. So largely the macros are also positive. And I mean if we leave aside the event that has been there for last two weeks or so, it has created some challenge in the northwestern states. I think overall we still feel that we should see a single digit growth across all the segments and within the segments.
Slightly better growth for HCV heavy commercial vehicles and buses, and slightly lower for aisle CV and steel pickup. So that’s how we see the likely growth within quarters. I think Q2 should see a better growth on a YOY basis. One of the reason being the base effect. But otherwise on the overall basis, I think we should see a single digit growth. Balaji?
P.B. Balaji
Thank you, Girish. Richard, coming your way. Raghu from Nuvama Research questions on JLR. Emission cost increase was at GBP36 million. How much increase is expected ahead on RR Electric? When is the launch expected? Considering the large waiting period and also how much will be depreciation? Post this launch and could you then also talk one shot, the entire tariffs for US, how much will be passed on to customers? What about demand scenario, all that and how can the benefit of cost savings, how much can it flow through in FY26? And what about CJLR volumes? Have they reached a trough?
Richard Molyneux
Okay, let me have a go. So emissions cost. For us, this is also an area that is a little bit in flux, particularly in the us. The administration hasn’t yet taken any actions there, but we know that they are looking at the California exemption and some of the states, Maryland for example, are looking at moving away from their association with those California emission standards. There’s also legislation expected later this year in terms of the overall EPA levels that are required. So emissions is also an area in flux. You would naturally expect our exposure to increase year-over-year as a result of our BEVs being slightly later in the plan.
Always were later in the plan. The flip side, we know that Europe has taken a few actions to mitigate the level of their penalties. We know the UK have already taken action with the ZEV mandate to also mitigate some of the effects of that legislation. We expect the same thing will happen in the US too over time. So this is a little bit of a battle between consumer demand and regulations. And in democracies, ultimately the regulations will probably have to adapt that will benefit us. But in the first couple of years until those changes have worked through, I would expect our emissions costs to rise.
Range Rover Electric. So the development’s continuing. We’re actually testing it at plus 40 degrees centigrade in the sand dunes of the Middle east and minus 40 degrees centigrade in the ICE lakes of the Arctic. So we are really diligently making sure that this car can do what a Range Rover can do, regardless of whether it’s got a BEV powertrain, an ICE powertrain or any other powertrain. So we’re absolutely determined to make that car the best Range Rover it can be. We will expect formal reservations and certain markets, let’s say reservation fees, later this year. And the waiting list is currently at 62,000 people.
Next one, tariffs, right. So on tariffs, we really welcome the deal that the UK and the US Administrations have done. It provides a good level of relief from the sudden and very steep tariffs applied to the UK auto sector in April. And remember what happened on April 3rd is suddenly we got a 1000% increase overnight in our tariff bill for selling cars in the US. That’s a significant’s about. The deal that’s been done now between the UK and the US should bring that down. However, it will still be a 300% price increase or increasing cost of tariffs versus where we were in March.
So it’s gone from 2.5% to 10%. So we’re happy the deal brings the UK auto sector in line with all other UK businesses which also face 10% tariff. Remember, it was automotive, steel and aluminium that were given special treatment’s at the 25% tariff level. And we’re just awaiting from the UK government some details as to exactly what the terms of the agreement are and when it will be implemented. It did say immediately in the releases, but we’re still waiting to hear exactly, either retrospectively or prospectively when it will apply, what the impacts on parts are, whether there’s any rules of origin requirements, et c etera.
P.B. Balaji
CJLR.
Richard Molyneux
CJLR. So CJLR had a difficult year because the vehicles that it is producing are coming to the end of their cycle. So for example, production in China of the Jaguar xf, XE and EPACE will come to an end in September this year. Now that’s deliberate because you’ll remember we signed a license agreement with Chery for the production of vehicles of a CJLR architecture, but with the Freelander brand name. And those vehicles will start production in our Changshu plant in the CJLR joint venture next year. Those vehicles are offered Chinese architecture with Chinese attributes and Chinese Chinese costs.
So they’re perfectly aligned Chinese requirements. They will have the capability of being exported globally at stage in the future, but they are initially for the China market only. So production of Freelander will start in the plant as the run out of our legacy vehicles comes to an end. So it’ll be synchronous and should allow JLR to benefit not only from license fees that it will get from the Freelander brand and our helps and efforts in designing the vehicles, but also from the 50% share of profits that the JV will make going forward. So it’s a very good deal for JLR.
P.B. Balaji
Thanks Richard. Maybe one final one which I missed. Apologies for that. How much of these benefits and cost savings you are expecting to see in FY26?
Richard Molyneux
We’ll cover that in Investor Day.
P.B. Balaji
Cool. Thank you. Girish coming to you. Question again from Raghu Nuvama. Questions how do you see the domestic MNHC, the outlook for FY25 freight utilization? How is it happening for transporters, also impact of DFC, There’s a question that keeps coming every every now and then, and AC regulation there’s another one more query somewhere else in terms of the cost of this AC regulation, how’s it going to be? And yeah, those are the main ones.
Girish Wagh
Okay, so I think as far as MN[Phonetic] SUV outlook is concerned I have already answered this question in response to a question earlier. So we will have around single digit growth happening for the entire year within quarters. I think quarter two will see a slightly higher growth. Second one is about fleet utilization. So I would say the fleet utilizations at around 2% to 5% higher compared to the same period last year. And this is based on the 800,000 vehicles that we track. So this is that we see there is a 2% to 5% growth on a YoY basis.
As far as Western DFC impact I think as we’ve been saying in the past the western dedicated trade corridor will carry a lot of export import traffic, freight so a lot of container traffic therefore is likely to move to this and this may impact to some extent the tractor trailer market which is essentially the 40, 46 ton trailers tractor trailers. But at the same time I think we need to keep two things in mind that, skill on a point to point basis the road sector will be better as compared to rail. And even if there is a movement happening of containers from hub to hub basis we certainly need the tractors for hub to spoke as well as the first and last mile movement especially on the ports.
I think in a nutshell therefore net net I don’t see much an impact as we are here today. Coming to AC regulation Balaji, there is another question also so I will address it comprehensively. So as far as cost increase is concerned, see the cost increase in percentage terms will be lower or minimal for heavy commercial vehicles because the base cost is more there. So the cost impact on the biggest vehicle could be somewhere around 0.5% to 0.6% but the cost impact for a say intermediate light commercial vehicle will be slightly higher. Could be in the range of 1% to 1.2%. But, as a company I think as we’ve been saying that we don’t just comply to the regulations but we always come up with some value announcements and therefore the product makes sense for the customer.
Beyond this I think there is another question by Amin which is about what is the likely Impact on the fuel efficiency. So by physics and engineering, yes, I think when you run the AC, the compressor will consume some power so there will be some impact. But I’m sure, I think like all OEMs, we will be working towards ensuring that this impact gets minimized. And the question whether this will turn out to be a headwind. No, because I think in terms of price increase it will be in the range of 1% to 1.5% and fuel efficiency impact will be lower single digits.
And as a company, we will ensure that there is a value announcement being delivered to the customers.
P.B. Balaji
Thank you. Girish, the final point on where does post demerger will Tata Capital stake be part of CV business? The answer is yes. Net worth and profit of Tata Capital will take it offline. Okay, moving to Rakesh Kumar, BNP Paribas, you already answered the question on US tariffs. I’ll leave that out. Let me get into the FCF. His point was FCF and FY25. Working capital did play a big part. How do you see working capital trending in FY26?
Richard Molyneux
Okay, so working capital is very seasonal for us. So Q4 is always very strong. That’s partly because simply from a calendar basis our production levels are higher in Q4 and therefore our payables are higher. So you would expect that to come back in Q1 for the full year. We would also expect that to come back a little bit. Although we will keep the diligence on receivables, we will keep the diligence on inventory levels. So we will continue to drive it down. Over the last two years, I think working capital has been about $1.35 billion favorable.
In the prior two years, FY22 and FY23, it was $1.35 billion negative. So I wouldn’t expect massive moves. But during the course of the year there will be normal seasonal movements in working capital.
P.B. Balaji
Yeah, just add one additional color on that. It obviously depends on how the total demand plays out in the year progressing that. So let’s watch the space is what I would say. Just to add to what Richard just said. Richard staying with you. This is Aditya Jawer on Investech from Investec update on the Chinese market. Let’s talk about that. Macro outlook, dealership consolidation, launch of EVs Jaguar and Ara. How do you see that?
Richard Molyneux
Okay, so I’ll do the second one, the first launch of EVs I think I’ve already mentioned that will start taking reservations for Range Rover Bev this year in relation to Jaguar. So you’ve seen the type 00, which is the design vision for Jaguar. We’ll unveil the first actual car, the four door GT Jaguar, later this year before that car goes on sale in 2026. And remember, Jerry does say that he doesn’t just do concept cars so you can expect the production car to be sufficiently similar, let me say. So that’s the timing of Jaguar and Range Rover electrics.
Look the China market, it is tough. It’s tough for everybody. We are seeing at least a slowdown in in the rate of dealers leaving the premium western segments and are actually now moving to the scenario where we are looking to fill distribution holes. So that trend I think is reaching, or will reach relatively shortly, a flex point. We are focused very much on making sure we do not overstock the retailers in China. So as I mentioned beforehand, we’ve kept days of supply at the retailers at the end of this year was lower than both at the end of Q3 and at the end of FY24.
So we will manage it very carefully.
P.B. Balaji
Thank you Richard. Maybe moving on to the VME question, tariffs you already covered extensively so I don’t want to repeat that. Let’s talk about VME. There is a step up in VME this quarter as well, about 80 odd bits. Can you throw some light on how we should think about VME going forward?
Richard Molyneux
Yes. That’s also where we will need to look at what is going on globally in the industry. We’ve already mentioned, I think Balaji you mentioned that one of the ways that we would expect some of our competitors in the US to react to tariffs will be to reduce their levels of VME. It is easier and quicker to do than changing price. So that may happen, that may not happen. I think globally we’re still in a position where VME levels are on a trend rise, but it isn’t dramatic and I think we will learn quite a lot from what happens over the US in the next couple of months.
P.B. Balaji
Thank you Richard. Sorry, I’m going to continue with you for a while. So this is from Gunjan bank of America. Can you talk about region wise growth? You did cover about it, but maybe you may want to give a little bit more flavor there. And how should we look at warranty cost trends? And while we wait for the margin update in for the investor day, can you also talk us through the various levers you’re looking at to drive your EBIT margins,electric triangle launch line we already talked about?
Richard Molyneux
Okay, so region wise growth outlook for jlr? We do have a fairly balanced global spread of sales between our six regions. So I’m not anticipating a massive change in that. I do think that overseas is an area for us that has further growth potential. I mentioned that we sold 70,000 vehicles there this year. We sold 51,000 in FY22. So we’re on a strong trajectory and I think there is more that we can do there. China in the us, I’ve mentioned the UK is recovering and Europe, particularly Germany, actually is quite strong for us at the moment.
So I don’t see a major split, a major change in our global sales mix, but I think if anything’s going to rise, it’s probably overseas. UK and China is still one where we’re looking at. Warranty costs. Can I look at trends on warranty costs? It is. I mentioned it beforehand. It is one of the key missions that we have set ourselves to get on top of vehicle quality and the time it takes us to respond to quality slips when we find them, and the amount of money that we get back from suppliers when it is their responsibility.
I’m not going to anticipate at this point any major continued increase in our warranty costs. I think we’re aiming to try and get them capped and then to bring them slowly down.
P.B. Balaji
Thank you.
Richard Molyneux
Is that the end of that question section?
P.B. Balaji
That’s right. Thanks, Richard. So, again, sticking with you, I know we don’t normally talk short, immediate quarter that, given all the chaos that’s happening first quarter, how should we. How should we see the first quarter? This is from Kapil Singh Nomura.
Richard Molyneux
So I mentioned working capital that will definitely swing back in Q1, so not by an immaterial amount. In terms of volumes, we pushed really hard in Q4 to make sure that we met our commitments to you and everybody else that we get from cash or EBIT. So Q1 probably will not be as strong. We did also, as I’ve mentioned, deliberately push more vehicles through the import structure in the US to get them to the dealers before any tariff effects came in. So that was a bit of an acceleration from sales that we would normally have done this quarter into Q4 last year.
So it certainly will not be as strong in terms of sales as we did last quarter.
P.B. Balaji
Yeah. Thank you. Also, when will legacy Jaguar wholesales drop to zero?
Richard Molyneux
So we. Good question. So we have already ceased production of the Jaguar XE and XF and F Pace, sorry, F type, in Castle Bromwich. That was in May 24. In December 24, we ceased production of the I Pace and the E Pace in Graz, which meet. And we’re also going to cease the production of the Jaguars in China that I mentioned before September 25. So that will mean the last Jaguars that’s getting produced is the F pace that is produced in our Solihull plant in the uk. So that will go through the end of this year.
That will be the last Jaguar vehicle that was offered for sale before we take Jaguar out completely and launch the four door GT based off site 00 which we showed earlier on.
P.B. Balaji
Thanks Richard. One I mean a few questions in terms of why other expenses have dropped so much this quarter. Were there any one-offs in that as well as the depreciation line is continuing to trend down this from Gunjan. So how should we see this again?
Richard Molyneux
Other expenses dropped quarter-on-quarter is largely warranty. But warranty is also one of the reasons why other expenses year-over-year is significantly up. So there’s a bit of a timing effect as to warranty accruals for certain one-off campaigns. Sorry, the questions have just disappeared.
P.B. Balaji
Yeah, so you cover that. Perfect. So let me move to again staying with you. I think Jay Kale is asking this question. Yes. We will update you in terms of EBIT guidance in the Investor Day. What are the developments you are watching for, and how are you looking into this whole space in preparation for the Investor Day? Can you just give us a bit of color on that?
Richard Molyneux
Yes. And you’ve covered some of the points there. So one is, what is the implementation date of the deal with the UK, and will there be a EU US trade deal and if so, what for what form and shape and dates will it take? So we’re already six weeks into in fact coming up to seven weeks into FY26 for us. So getting some of these issues sorted is going to be really important for us to make sure that we understand where the full year position is.
P.B. Balaji
Yeah. Also again from Kapil, in terms of emissions, will a delay in emission targets be positive for JLR overall. You will need to step up investments in ICE platforms.
Richard Molyneux
We are going to extend the availability of ICE solutions versus our previous plans, simply because consumer demand for those vehicles is there. Ultimately this whole thing has to be driven by consumer demand. Governments cannot regulate you to do it, certainly in democracies. So we will meet the consumer demands. There is a large number of people in many different regions in the world that are desperate for BEVs. We will give them BEVs. There are some markets, for example the Middle East which will want ICE vehicles for quite some time in the future. That is the market that we are going into.
It is no longer one car, or one powertrain for the world. There are different sectors of the market globally that will require different solutions and we have to adjust to give those customers in those segments the solutions that they want. So yes, we are going to invest more in keeping our ICE powertrains going. But we are also investing really significant money in making sure that our BEV vehicles get launched are covered off range roof BEV and Jaguar BEV already.
P.B. Balaji
Yeah, thanks. So, I’ll probably come to you Girish because the rest are covered in the question from Raghvendra Goyal Ambit. Shailesh already talked about the PV margins. Can you talk about your drivers for margin improvement in CV? Positive, negative, both sides.
Girish Wagh
Okay, so let me talk of the headwinds first. The headwinds I think commodity is after two years we see some headwind on commodity and this is coming from steel safeguarding duty. There’s likelihood of some increase in copper and precious metals is something that we keep a watch on. So therefore some minor headwinds I would say in commodity. AC regulation also we spoke what is the kind of cost impact which will be there only in trucks. And lastly I think employee cost, a similar kind of impact that we’ve seen in FY25. So these are the headwinds I think on tailwinds or positives I think we will continue to work on cost reduction.
We have been able to get a good cost reduction delivery over the last two years and our aim is to continue with that. So net net I think we are targeting to have cost reduction which is going to be more than the increases that we will see during the year. I think that’s where we are. Finally I would also like to say that we will continue to increase the value being delivered to the customers. Whether it is through product improvements, product enhancements and also a large service portfolio that we now have including our digital services.
So with this we will continue to deliver better value to the customers, which will also help us to improve the realization. Balaji? Thanks Girish. Kapil saying on CAPEX plan, can you give us a plan for FY26? Kapil will be broadly in line with what was there this year. Year JLR is about 3.8 billion this year it’ll be broadly in that zone. PV CV together it did about 8,400 crore. That also will be broadly in that zone. But as we had clarified earlier also all of this will be funded by operating cash flows. So next one is from Dhiman. I’ll probably give it to you. PD PLI has Seen a sharp increase in fourth quarter. Anything to do with prior year, prior quarter volumes. What is the sustainable run rate for this?
Dhiman Gupta
So it’s largely been flat. In Q3 the PLI accrual was about INR180 crore. INR100 crore of that was pertaining to FY24 and INR80 crore was pertaining to the first nine months for two products. This quarter the PLI versus last year was flat. Last quarter was flat, it’s about INR170 crore. So I’m not sure whether we are. doing right comparison on this number. This quarter out of this about INR30 crores, INR40 crores was pertaining to Punch pertaining to last quarter for the full quarter it was about INR120 crore, INR130 crore and we should see that run rate continue for the subsequent quarters. We will have Nexon TCA certified also in Q2 when it’s going to see a jump and then obviously etrena probably in Q3. So it is going to ramp=up through the year.
P.B. Balaji
Got it. So Ashish, in case you need further clarification, do reach out to the IR team, they’ll be happy to clarify. Richard is probably coming to you from Nishit Jalan. What do you mean by protect EBIT? Does this mean that despite tariff impact, we are looking to protect absolute debit through price increases and cost reduction efforts? My immediate response is initial. Just hold your fire till June 16th. But Richard, feel free to add anything on top of it.
Richard Molyneux
No, that’s fair. I mentioned beforehand, as it stands Today, we have 1,000% increase in our tariffs from Slovakia through to the US. And assuming the government deal was immediate when it says immediate, we still have a 300% increase in our tariffs from the UK to the US. So we do have to protect our bottom line delivery and that’s exactly what we mean there.
P.B. Balaji
Got it. So I think with this we are coming to end of all the rest of the question. There’s a lot of repetition that we see in that. So we think, we believe we’ve covered all the key angles that are there. So therefore, if there’s anything that we critical question that we believe we have missed, feel free to reach out to the investor relations team. Once again, thanks all of you for your patient, listening and of course your probing questions. We are wanting to end this session by confirming that it’s been a solid delivery this year.
The fundamentals are in a very good place in all the businesses and as the actions start kicking in this year, be it product launches, be it on the cost effective measures that are there as well as the what we delivered last year. I think we’re quite confident about the external situation. Despite it being challenging. We believe we have what it takes to actually navigate this well. So thank you for all that and look forward to speaking to you soon in the investor days, both here and in Gideon. See you there. And thanks to the team both at JLR and here in the room.
Thank you guys and good night and see you soon. Bye. Bye.