Why Tata Motors Share Price is Falling

The automobile sector in India has been experiencing significant growth over the past few years. Driven by rising income levels, government policies, and increased consumer demand, the sector has seen both domestic and export growth.

Indian automobile companies, including major players and newer entrants, are continually expanding their product lines and focusing on sustainable vehicle technologies.

However, challenges like rising input costs and changing regulatory requirements also affect this industry.

When discussing the auto sector, Tata Motors inevitably comes to mind. As one of India's leading automobile manufacturers, Tata Motors has a strong presence domestically and abroad.

The company produces a wide range of vehicles, from passenger cars to commercial trucks, and has a significant stake in electric vehicle (EV) development. It also owns the luxury car brands Jaguar and Land Rover, which contribute to its global footprint and influence.

Recently, Tata Motors share price has come under the scrutiny of investors. Its stock fell by 5.8% within five days following the release of its quarterly results. This sudden drop has raised questions about the company's performance and investor confidence.

Let's take a closer look at the company's latest quarterly results to understand why Tata Motors share price is reacting negatively.

Weak Quarterly Results

During Q2FY25, the company reported an 11% year-over-year (YoY) decrease in consolidated net profit, reaching Rs 33.4 billion (bn), down from Rs 37.6 bn in the same period last year. This decline in net profit reflects challenges in both domestic and international markets.

Earnings before interest, tax, depreciation, and amortisation (EBITDA) for Tata Motors also dropped by 16%, falling from Rs 137.7 bn YoY to Rs 115.7 bn. The EBITDA margin contracted by 230 basis points, settling at 11.4%.

Analysts attribute this margin decline largely to Jaguar Land Rover's (JLR) performance, which missed margin expectations. JLR faced obstacles in the form of temporary supply constraints and ongoing economic challenges, particularly in China and Europe.

Tata Motors, however, remains optimistic, reaffirming its full-year guidance of around £ 30 bn in revenue, an EBIT margin of at least 8.5%, and a positive net cash position.

In addition to supply disruptions, JLR's business was affected by aluminium supply constraints and delayed shipments. These factors, alongside a tough macroeconomic landscape in China and Europe, pressured its operations.

On the domestic front, India's commercial vehicle (CV) and passenger vehicle (PV) demand showed signs of a slowdown, though CV profitability remained resilient.

The dip in Tata Motors share price following the release of its quarterly results can be attributed to these weaker-than-expected financial metrics. Slowing demand, supply constraints, and margin pressures have caused investors to reconsider the company's short-term growth potential, leading to a decline in its stock price.

What Next?

After a challenging Q2 FY25, Tata Motors is focusing on targeted strategies to drive recovery and growth. The company remains committed to becoming net debt-free and enhancing profitability across its divisions.

In the domestic market, Tata Motors expects a moderate recovery supported by the festive season and infrastructure investments. For JLR, easing supply issues should improve wholesale numbers, while focusing on expanding its luxury and electric vehicle (EV) offerings.

JLR's full-year target is around £ 30 bn in revenue with an EBIT margin over 8.5%.

The company's commercial vehicle (CV) segment is set to grow through innovation and consistent service quality, while the passenger vehicle (PV) division aims for retail expansion and cost control.

Tata Motors also prioritises the EV market, planning to mainstream EVs with a broader portfolio and a strengthened ecosystem to capture significant market share.

As supply constraints ease and demand rises in the latter half of FY25, Tata Motors remains vigilant about global market conditions, especially in China and Europe.

By balancing growth initiatives with careful resource management, Tata Motors is positioned to address immediate challenges while setting the stage for sustained, long-term growth.

How Tata Motors Share Price has Performed Recently

In the past five days, Tata Motors share price has tumbled 5.8%. In the last month, it has slipped 15.2%.

The stock price has remained under pressure in 2024. However, it has rallied 20.6% in the last year.

The stock touched its 52-week high of Rs 1,179.1 on 30 July 2024 and a 52-week low of Rs 656.7 on 15 November 2023.

About Tata Motors

Tata Motors Limited is a leading global automobile manufacturer with a portfolio that covers a wide range of cars, SUVs, buses, trucks, pickups, and defence vehicles.

It's a US$ 34 bn organisation and a leading global automobile manufacturing company.

Tata Motors offers an extensive range of integrated, smart, and e-mobility solutions.

The company has a strong presence in India, but it also exports its vehicles to over 100 countries around the world. It has several joint ventures with other automotive manufacturers, including Fiat, Jaguar Land Rover, and Daimler.

To know more about the company, check out Tata Motors financial factsheet and its latest quarterly results.

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