Will the Turnaround in Tata Motors Reflect Soon in Tata Motors Share Price Too?

31 Dec 2020by Pradeep U

Will the Turnaround in Tata Motors Reflect Soon in Tata Motors Share Price Too?

2020 has been termed one of the worst years for passenger vehicle manufacturers in India in the last few decades. Multiple lockdowns associated with the Covid-19 pandemic and slowdown in the economy forced many car manufacturers in India to temporarily halt production lines. The situation was so bad in April 2020 that many automakers reported zero monthly domestic sales for the first time in the history of Indian automotive industry.

Tata Motors, a star shining bright amid all the turmoil in the Indian auto industry.

During the period Apr-Sep 2020, Tata Motors was the sole passenger vehicle manufacturer in India to report a growth of 2.63% in sales.

Vehicle Sales

Source: SIAM & ET

Comparison of Market Share (H1)

  Market Share FY20 Market Share FY21
Maruti Suzuki 47.7% 49.9%
Hyundai 17.8% 17.8%
Tata Motors 5.3% 8.0%
M&M 7.1% 5.7%
Kia Motors 1.7% 4.1%

Source: SIAM & ET

The number of units sold in October was 23,617, the company's highest mark since July 2012. In November 2020, the company sold 21,641 units against 10,400 units sold in the previous year's corresponding month, recording a growth of 108%.

The impact of this is also visible in the Tata Motors share price, which has almost tripled from its lows of Rs. 63.60 on 24th March 2020 to above Rs. 184 as on the current date.

Tata Motors' turnaround can be attributed to multiple factors like strong product portfolio in high volume segments, product-focused branding strategy, high safety ratings, better ownership experience, and an overhaul of its passenger vehicle business. The recent trend of preference for Made-in-India products has only made things better for Tata Motors' cars.

Growth in Tata Motors share price (Jul-Dec 20)

But is this momentum in Tata Motors share price here to stay? Will the current turnaround at Tata Motors also reflect in further growth in Tata Motors share price in the coming years?

To understand the answer to this question, let's examine the critical triggers behind this growth momentum at Tata Motors.

Launch of Turnaround 2.0

In early 2017, Tata Motors' management launched a new initiative named 'Turnaround 2.0' to gain additional market share and make the company's commercial and passenger vehicle segment self-sustainable and more profitable.

Introduction of Impact 2.0 Design language

In 2018, Tata Motors introduced an advanced version named IMPACT 2.0 of its earlier design architecture codenamed IMPACT according to which the interior of the company's passenger vehicles would be influenced by Indian architecture. In the newer models of cars launched by Tata Motors, the company started offering a clutter-free and protruding dashboard screen that is wider and better, with many other features.

New launches and facelifted models of existing cars

Once known for not so aesthetically pleasing workhorses like Sumo and Indica, Tata Motors has been quick to discontinue models with low demand. Cars such as Sumo, Safari, Nano, Indica, Indigo were discontinued after 2016.

Tata Motors not only revamped its existing cars such as Tiago, Tigor, Harrier and Nexon but also launched premium cars such as Altroz and Nexon EV. Value for money packaging with multiple feature-rich variants has helped Tata Motors to offer a wide range of products at multiple price points. For instance, the company's latest offering Altroz is available in 22 variants with a price range between Rs. 5,4,000 to 9,09,000 with a price difference of Rs. 20,000-25,000.

Strong focus on safety

A strong push for the safety of cars offered by Tata Motors worked well in favour of the company. To promote its vehicles' safety features, Tata Motors launched a series of ad campaigns on multiple platforms.

Opening of new outlets

In the last financial year, Tata Motors added 100 new dealerships for passenger vehicles. The total no of dealerships for the company across the country stood as 860 as on Mar 2020.

Will this turnaround benefit Tata Motors share prices too?

For the quarter ended Dec 2020, Tata Motors has reported an increase of 67% year on year growth in its consolidated net profit at Rs. 2906.45 crores as compared to the corresponding period a year ago. The growth in consolidated revenue from operations was 5.5% year-on-year at Rs. 75,653.8 crores in the third quarter of FY21.

Compared to 13,893 units sold in January 2020, Tata Motors has sold almost double number of cars in January 2021 amounting to 29,980 units. And this impressive growth in numbers has not just come from one product but from multiple products. Apart from the company's best seller the Nexon, other models such as the hatchback Altroz, the SUV Harrier, compact car Tiago and sedan Tiago have recorded good sales.

Tata Motors' turnaround can be attributed to multiple factors like high safety ratings, robust product portfolio in segments with high volume, branding strategy based on products and better customer experience. The recent trend of preference for Made-in-India products has only made things better for Tata Motors.

As of now the road ahead looks bright for Tata Motors. It is said that when a company does well, its share price automatically follows. However, there are some other vital things also which may impact Tata Motors share price in future. One of them is a high debt of ₹48,000 crores as of FY 2020. In the company's 75th annual general meeting in Mumbai, its top management had announced that the company intends to reduce its total automotive debt to zero in the next three years.

Invest wisely after detailed research.

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Article updated on 5th February 2021.

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