Near-term Headwinds

Tata Motors is India’s largest automobile company in terms of revenues. Of the total revenues earned by leading auto companies such as Maruti Suzuki India, Mahindra & Mahindra, Bajaj Auto and Apollo Tyres, Tata Motors alone accounts for a revenue share of around 53 per cent. It is the market leader in commercial vehicles, with around 60-65 per cent share in major segments. It is the third largest player in passenger cars. The company acquired the commercial vehicle business of Daewoo in 2004 and Jaguar Land Rover (JLR) in 2009. In India it has an industrial joint venture with Fiat. Through subsidiaries and associates, the company has operations in UK, South Korea, Thailand and Spain. Headwinds for auto sector The auto industry faces multiple headwinds in the short run. In recent times, manufacturers have increased the sales price of vehicles in order to at least partially pass on the higher cost of raw materials. Vehicle owners’ cost of ownership has also gone up owing to a 28 per cent increase in the price of petrol and a 7 per cent increase in the price of diesel over the last one year. Moreover, auto loans have become costlier by 150-200 basis points over this period due to the interest rate hikes undertaken by the Reserve Bank of India. As a result, volume growth in the auto space is slowing down while inventory levels are going up. This holds especially true for the passenger segment and the medium and heavy commercial vehicles (M&HCVs) segment. However, two wheelers, utility vehicles (UVs) and light commercial vehicles (LCVs) continue to record strong volume growth. Commodity costs have started easing now