Tata’s Tiago Helps It Weather The Demonetization Storm In India
India’s automotive market took off in the last two fiscal years, on the back of growing disposable incomes, healthy GDP growth, and a stable government at the center. The passenger and commercial vehicle markets combined rose 2.5% year-over-year in fiscal 2015 (ended March 2015), and then by 8% in fiscal 2016, and were expected to carry this momentum into fiscal 2017 and record double-digit percentage gains. India’s GDP was estimated to expand by 7.6-7.7% in fiscal 2017, and then by a stronger 7.8% in fiscal 2018.
However, demonetization of certain currency notes (500 and 1,000 rupee notes) in November last year caused a major cash crunch around the country, especially hurting the unorganized sector. As a result, the passenger and commercial vehicle markets also suffered a temporary setback. Loan disbursal also slowed down as the bank officials were busy attending to this cash shortage. In a country where most transactions are made through cash transfers, the paucity of cash, especially of the bigger currency notes, caused a disruption in the business environment. The Indian automotive market that grew by a solid double-digit rate till October, slowed down in November, and then declined 19% year-over-year in December. This resulted in an overall moderate growth of 9.4% in the April-December period in the auto market. Now, India’s auto growth is not expected to reach double-digits this fiscal, although this might only be a temporary aberration.
Sales numbers for most automakers such as Maruti Suzuki, Hyundai, and Mahindra & Mahindra were negatively impacted due to the demonetization. Certain automakers also shut down their facilities for a week or more last month, raising suspicion that this was prompted by an anticipated sales decline and to avoid inventory pile up at dealers.
- Tata Motors Stock Up After Announcement Of Investment In EV Business, Will It Sustain?
- Will Tata Motors Achieve Pre-Corona Stock Price?
- Can Tata Motors Stock Grow After A Slowdown Warning?
- Is Jaguar Land Rover 50%, 70%, Or 80% Of Tata Motors?
- Why Tata Motors Stock Has Rallied 30% Over The Last Week
- How Does Tata Motors Compare Against A Giant Like Toyota Motors?
However, Tata Motors posted solid numbers in the domestic market, continuing its solid recovery in the Indian automotive market. The company’s domestic sales in passenger vehicles rose 35% in December, with passenger car sales growing by 40%, due to the continual strong demand for the Tata Tiago, which was launched in April last year. The Tiago clocked 50,000 bookings by last October itself and has become Tata’s best-selling model, forming ~50% of all of Tata’s passenger vehicle (passenger cars+ utility vehicle) sales in the last couple of months. The hatchback Tiago has been a crucial model for Tata, especially since the hatchback segment forms close to half the net passenger car sales in the industry. The model has done much better than the previously launched Zest, and Bolt models, part of the company’s Horizonext initiative, announced in 2013, an aggressive strategic plan for its passenger vehicle business unit to reverse the trend of flagging sales. Tiago has helped Tata revamp its image and reverse the trend of declining sales in the home market over the last few years. In fact, Tata Motors managed to beat the likes of Mahindra & Mahindra and Honda to regain the position of the third largest car manufacturer in the country.
Tata’s market share in India has declined over the last few fiscal years, but this is set to change in fiscal 2017, if the trend seen over the first three quarters of fiscal 2017 continue into Q4. While sales of passenger vehicles in India rose 8.6% year-over-year during the April-December period, Tata’s sales rose by a larger 17%. This has been mainly on the back of solid sales for the hatchback Tiago, which has almost single-handedly turned Tata’s performance around in India’s passenger vehicle market.
Have more questions on Tata Motors? See the links below.
- The Year That Was: Jaguar Land Rover
- How Tata Motors’ India Business Is Panning Out This Fiscal Year
- Tata Motors’s Q2 Results Were Marred By FX Revaluation And Hedging Losses
- Three Reasons Why Trefis Is Bullish On Tata Motors
- Tata Motors’ India Business Is Heading In A Positive Direction
- Tata Motors’ 50% Drop In Profits In Q1 Is Not All Bad News
- Brexit Could Be Good Or Bad News For Jaguar Land Rover
- New Compact Models Boost Jaguar Land Rover’s First Half Volumes
- Tata Motors Rides On Strong Q4 Performance By Jaguar Land Rover To Boost Fiscal 2016 Results
- Jaguar Land Rover Steps Up Unit Sales In Crucial Markets
- How Will Tata Motors’ Valuation Be Impacted If Jaguar Land Rover Sells Fewer Cars Than Estimated?
- What Will Be The Jump In Tata Motors’ Valuation If Jaguar Land Rover Sells More Cars Than Expected?
- Where Does Jaguar Land Rover Stand Relative To The German Top 3 In Crucial Markets?
- What’s Tata Motors’s Fundamental Value Based On Expected Fiscal 2017 Results?
- How Has Tata Motors’s Revenue And EBITDA Composition Changed Over FY12-FY17?
- By What Percentage Have Tata Motors’s Revenues And EBITDA Grown Over The Last Five Years?
- What Is Tata Motors’s Revenue And EBITDA Breakdown?
- Where Will Tata Motors’s Revenue And EBITDA Growth Come From Over The Next Three Years?
- Why Jaguar Land Rover Forms More Than 90% Of Tata Motors’ Valuation
Notes: