|
| Tata Motors: Long road ahead | |
| Shobhana Subramanian & Varun Sharma / Mumbai December 03, 2008, 0:47 IST | |
These are hard times for India’s biggest auto firm,Tata Motors. As if the relocation of the plant to make the small car Nano from West Bengal to Gujarat wasn’t enough, both commercial vehicles and the car businesses are under pressure. After a reasonably good first half, October and November have been difficult months—volumes for CVs dropped a steep 40 per cent in November.
 Although 2007-08 had seen just a six per cent growth in volumes (including exports), this kind of fall in demand was hard to imagine. The firm’s bestselling LCV — the Ace — which seemed to be bucking the trend till September has also lost steam; volumes in the LCV segment dipped a sharp 16 per cent in November.
It’s not just CVs, cars too aren’t finding enough takers with the result that volumes in November fell 12 per cent. The management believes lack of financing schemes is hurting sales. That may well be true though in the current environment consumers are holding back purchases.
In any case, until interest rates fall and the economy gathers pace, it’s unlikely that sales of trucks and cars will bounce back. Not surprisingly, the company has scaled back production and temporary shutdowns have been scheduled; the Pune plant, for instance, will now be closed for 12 days in 2008. Moreover, capital expenditure is likely to pruned. It’s not just the home markets that are challenging.
The slowdown in the US and Europe, which are the biggest markets for the Jaguar and the Land Rover, could result in lower volumes for these two models too. Already, numbers for the September 2008 quarter haven’t been encouraging –-between January and September, combined volumes are believed to have come off by about 11per cent .
Given that Tata Motors needs to raise $3 billion to replace a bridge loan that it had taken to finance the acquisition of JLR, analysts have suggested that it may want to hive off JLR business from its balance sheet.
That would reduce the debt burden on Tata Motors and losses, if any, incurred by JLR, will not hurt the company in these difficult times. Tata Motors’ revenues for the current year should grow by about 10-12 per cent over the Rs 28,266 crore recorded in 2007-08. The net profit, however, could be lower than the Rs 1,635 crore earned last year.
|
|
Content Guide
|