After JLR, Tata Motors Needs A 'Reimagine' Strategy Of Its Own

In the throes of the pandemic, Anuj Gupta and Neil Nazareth traded in their Hyundai Verna and i20 for a Tata Nexon and Altroz i-Turbo. Their friends, Suchit Pandya and yours truly, bought the Tata Tiago as their first cars around the same time.

Peer pressure? Perhaps. Five-Star ratings? Definitely.

That unique selling proposition—safe, feature-rich cars across multiple powertrains and fuel options—increased Tata Motors Ltd.’s sales to often rival those of Hyundai Motor India Ltd.—India’s No.2 carmaker for the longest time.

Since 2019-20, Tata Motors has more than quadrupled its sales while the wider industry has grown by about 50%. Its market share has soared to about 14% from less than 5% in the pre-pandemic era. The stock has moved in tandem—from the lows of Rs 64 in March 2020 to a life-high of Rs 1,179 on 30 July 2024.

The ride has been bumpy since then—for the stock and the cars.

Tata Motors has shed almost a third of its market capitalisation in the past six months or so. Dispatches to dealerships have declined in four of those. Sure, it ended Maruti Suzuki’s four-decade-long reign as the maker of India’s best-selling car but its total sales rose by a mere 0-2% in 2024.

What gives?

About 7-8 years back, Tata Motors redefined its philosophy, its brand, made in-car safety a priority, and added global suppliers to its supply chain. Moreover, it was arguably the first mass-market carmaker in India to adopt electric mobility.

“Essentially, they transitioned—from a traditional Indian company to one that was looking forward (into the future),” Puneet Gupta, director at S&P Global Mobility, told NDTV Profit over the phone. “Today, it’s in need of another reinvention.”

“Most of the OEMs (original equipment manufacturers) today are talking about safety— that’s no longer a gamechanger. The competition has caught up.”

Caught up, and how!

After clocking double-digit growth in the first three months of 2024, Tata Motors saw its sales decline for the rest of the year, despite discounts across-the-board and entry into the lucrative mid-size SUV segment.

That coincides with the model onslaught by rivals.

In January, Hyundai India launched the third-generation of its Creta SUV. By the end of the year, it had clocked 1,86,919 units. In July, Tata Motors launched the Curvv as a direct rival, to limited success. Kia India Pvt. Ltd. refreshing the Seltos around the same time didn’t help matters either.

The underperformance rubbed off on the Nexon and Punch—the volume drivers for Tata Motors in the sub-compact SUV segment. Here too, the rivals in Maruti Suzuki (Brezza, Fronx), Hyundai India (Exter, Venue), Mahindra (XUV 3XO) and Kia India (Sonet, Syros) have multiple offerings. Skoda is readying the Kylaq as well.

All of these cars are packed to the gills with features, some of them are among the safest money can buy. In fact, Hyundai has made six airbags as standard across its model line-up.

“Tata Motors is no longer an also-ran. The competition is now watching its moves closely,” Gupta of S&P Global Mobility said. “They now need to really differentiate their products and brand.”

To be sure, 2024 was an “atypical year” year for the wider car industry.

Retail car sales—or vehicle registrations on the government’s vahan website—rose 5.18% year-on-year to 40.74 lakh units in 2024, according to data released by the Federation of Automobile Dealers Associations. That compares with the record 42.86 lakh cars that OEMs dispatched to dealerships during the year.

However, the unsold stock is noteworthy: dealerships are saddled with inventory of 55-60 days as against a recommended 21 days. About 5.5 lakh cars worth Rs 55,000 crore are languishing in stockyards for want of buyers.

Clearly, discounts that flourished amid a lack of demand haven’t paid off.

“We believe PV OEMs would come under pressure in Q3 FY25 owing to the record-high discounts,” Mumbai-based brokerage Emkay said in a note released on 18 December 2024. “While M&M is performing better than peers due to its relatively fresh product portfolio, Tata PVs are struggling after the relatively muted response for Curvv SUV.”

That Tata Motors continues to derive two-thirds of its revenue from JLR leaves it vulnerable to convulsions that the British brand may face globally.

A flooding at a Swiss aluminium mill ate into JLR’s bottomline in the second quarter of the ongoing fiscal, and that showed in Tata Motors’ latest earnings.

Consolidated net profit of the Mumbai-based automaker fell 10% over the year-ago period to Rs 3,450 crore in the quarter ended 30 September 2024, even as revenue dipped 3.5% to Rs 1.1 lakh crore. On a standalone basis, profit before tax was down 18.6% at Rs 1,153 crore while revenue fell 16.3% year-on-year to Rs 15,518 crore.

JLR is masking the India pains for now, but things can change quickly.

Jaguar is going dormant in the UK until 2026, when it will re-emerge to sell only high-end electric cars. That, when its peers in Europe are delaying or rethinking their EV transition amid a slump in sales.

“The EV-only bet puts Jaguar ahead of the curve. The company is being visionary and brave to adopt (an electric-only future),” S&P’s Gupta said.

According to him, there’s so much volatility in terms of EV policy and regulations that it is difficult for any company to predict the next 10 years. At a time when a Volkswagen AG, Mercedes-Benz or Stellantis is rethinking their EV strategy, an MG is deriving 70% of its volumes from electric cars.

“As a company, you need to be profitable and keep shareholders happy and, at the same time, adopt future technology,” Gupta said. “JLR is on the right track. [The EV transition] is a risky bet, given that two-thirds of Tata Motors’ revenue comes from JLR, but there are synergies as well.”

Analysts at Macquarie seemed to be in agreement with Gupta.

“The Jaguar brand unveil has been met with mixed media reviews, but we think it’s still premature to jump the gun on its potential,” Macquarie analysts Gunjan Prithyani and Eshan Bhargava wrote in a Jan. 8 note.

With electric vehicles, Tata Motors attempted something truly original in India—and succeeded. Its trucks are a legacy of Daimler in India. Some of its passenger cars are still built on a platform that once underpinned the Indica and Indigo. But it is arguably India’s first mass-market carmaker to take the electric route.

The company built its maiden electric car way back in 2006. The Vista EV was sold to fleet operators in the UK and other European markets. In 2017, the state-run Energy Efficiency Services Ltd. ordered 350 Tigor EVs, and then about 4,000 more in 2018, but government officials refused to use them citing poor performance and low range.

But, things change.

Success came in the form of the Nexon.ev in late 2020. In October 2021, TPG Rise Climate and ADQ invested Rs 7,500 crore in Tata Passenger Electric Mobility Ltd. An electric sedan (Tigor.ev) and an electric hatchback (Tiago.ev) quickly followed. The Punch was electrified in 2024. The Harrier and Safari are next.

In Fiscal 2024, Tata Motors’ EV business became a billion-dollar enterprise and accounted for three out of four electric cars sold in India. Such was the confidence that in August last year, Tata Motors entered the lucrative mid-size SUV segment with an electric powertrain.

But, things change.

In September, JSW MG Motor India Pvt. Ltd. launched the Windsor EV—a 4.3-metre utility vehicle—with its battery-as-a-service offering. The model has clocked 10,000 units in just three months. Overall, the company’s EV sales grew 125% year-on-year to 21,484 units in 2024. Over the same time, Tata Motors grew its sales by a mere 2.32% and lost 10 percentage points of market share—from 72.68% in 2023 to 62.01% in 2024.

“If you ask me, Tata Motors has been too late in bringing in BaaS,” Gupta said. “If they had done that one-and-a-half to two years back, things would’ve been very different. If Windsor can do it, then Tata can do it.” 

The competition is only going to get stiffer hereon.

Mahindra has unveiled its first “electric origin” SUVs—BE 6 and XEV 9e—in a price range of Rs 18-30 lakh. Maruti Suzuki and Hyundai India are set to unveil the electric avatars of their best-selling SUVs—eVitara and Creta Electric—at the Bharat Mobility Global Expo 2025.

“They (Tata Motors) may still be the market leader, but the competition is coming in thick and fast from the biggies,” S&P’s Gupta said. It’s no longer going to be a cakewalk. If MG with limited production capacity can dent (Tata Motors’) market share, then Maruti Suzuki, Hyundai India and Mahindra definitely will.”

Tata Motors’ EV-only dealerships is an opportunity here. Essentially, what Nexa did for Maruti Suzuki, Tata.ev can do for Tata Motors.

“Tata.ev is innovative. A separate showroom, different experience. Maybe, they need to build on that. They need to move on this quickly,” Gupta said. “They have done the hard work—building the charging infrastructure, popularising electric mobility…Now is the time to fly, rather than allowing the competition to catch up.”

Financially, Tata Motors is perhaps at its healthiest. The India business is debt-free. JLR’s higher volumes and improved product mix is likely to drive a sharp uptick in margins. The British marquee is on track to turn net debt-free and deliver free cash flow by the end of Fiscal 2025. Valuations are still attractive as compared to peers Maruti Suzuki and M&M. The upcoming demerger to split and list PV and CV arms should enthuse shareholders.

The customer too is largely satisfied with their purchase.

Anuj Gupta’s Nexon has completed nearly 70,000 km in a little less than three years, with nary a hiccup—save for a few service- and spares-related issues. He is now eyeing the upcoming Sierra as his next car. 

Neil Nazareth is pleasantly surprised by the handling and ride quality of his Altroz i-Turbo, even on his daily commute through a rowdy Ahmedabad traffic. He is now awaiting the launch of Harrier’s petrol variant.

For Suchit Pandya, the Tiago experience over 50,000 km has been iffy—the automatic is sluggish and the three-cylinder petrol engine often feels like a diesel mill. The cabin gets noisy, panels are squeaky, and fit and finish is sub-par. The after-sales service experience leaves much to be desired.

“They can do it. They not only have revenue but also the manpower to make the client experience much, much better than what it is now,” he says. “However, it feels like they're only interested in the numbers game and not really focused on the post-sales experience.”

Notice how none of them spoke about how many stars their cars have.

“Fundamentally, there’s nothing wrong with Tata Motors. They just need to bring in the next line of transformation,” S&P’s Gupta said. “They are still reaping the benefits of what they did 7-8 years back. It’s all about what they can do differently hereon.”

“If they don’t do it, this is going to be a very tough year for them.”