Tata Motors CV: Can the demerged entity hold its edge against peers?

Tata Motors demerger, aimed at unlocking value and sharpening operational focus, comes at a time when competition from peers like M&M, Ashok Leyland, and Force Motors is intensifying

Don't want to miss the best from Business Standard?

Tata Motors demerger As Tata Motors prepares for the listing of its commercial vehicle (CV) arm, the move is being closely watched for how it could reshape India’s commercial vehicle market.The demerger, aimed at unlocking value and sharpening operational focus, comes at a time when competition from peers like Mahindra and Mahindra (M&M), Ashok Leyland, and Force Motors is intensifying.  While some analysts believe that Tata Motors will continue to be a market leader in the space and the listing will allow better efficiency and long-term value creation, others remain cautious about near-term pressure on margins and valuations. 

 

The demerger will split Tata Motors into two independently listed entities — Tata Motors Passenger Vehicles (TMPV), which will house the domestic passenger vehicle business, the electric-vehicle (EV) division, and Jaguar Land Rover (JLR); and Tata Motors Commercial Vehicle (TMLCV), which will include the company’s truck, bus, and small CV operations.

  How Tata Motors' commercial vehicle (CV) entity stacks up against rivals such as Ashok Leyland and Eicher Motors, on market share, profitability, and product mix, will now determine whether the demerger truly delivers on its promise.

Tata Motors CV - A market leader

Tata Motors is the largest CV manufacturer in India, with a portfolio spanning small cargo vehicles (SCVs) to medium and heavy commercial vehicles (MHCVs) such as tippers and tractor trailers. Its retail market share, according to the Vahan portal, stands at 33–34 per cent. 

 

In October 2025, Tata Motors reported CV sales of 37,530 units, a 10 per cent year-on-year (Y-o-Y) rise from 34,259 units in October 2024. Ashok Leyland’s sales rose 16 per cent to 17,820 units, while Force Motors posted a 32 per cent increase to 2,835 units. 

In FY25, Tata Motors’ commercial vehicle arm (TMLCV) reported revenue from operations of ₹75,053 crore, with an Ebitda of ₹8,839 crore and an Ebitda margin of 11.7 per cent. The company's profit after tax (PAT) came in at ₹6,132 crore.

 

On ther other hand, Ashok Leyland reported revenue from ₹38,753 crore in FY25 and PAT of ₹3,303 crore. Another key competitor, Eicher Motors reported net revenue from operations of ₹18,451 crore and PAT of ₹4,279 crore.

 

Analysts at SBI Securities noted that while TMLCV’s implied P/E (price to earnings) post-listing ranges around 20× FY26E earnings, pure-play peer Ashok Leyland currently trades at 23×, providing a benchmark for relative valuation. Eicher Motors and Force Motors are trading at P/E of 39.1 and 39.6, respectively.

Iveco acquisition

Adding a global dimension to its business, TMLCV is set to acquire Iveco Group NV (excluding its defence segment) — among the top five global commercial vehicle manufacturers - for €3.8 billion in an all-cash deal. The acquisition will be funded through a bridge financing facility of €3.8 billion committed by Morgan Stanley and MUFG, to be refinanced with a mix of equity and long-term debt within 12 months of closing.

 

The transaction, expected to close by April 2026, will give Tata Motors access to critical EV and alternative fuel powertrain technologies, as well as software solutions such as ADAS and software-defined vehicle (SDV) platforms.

Analyst views

According to Kranthi Bathini, equity strategist at WealthMills Securities, Tata Motors’ strong brand equity and leadership in the CV space provide a firm base for long-term investors and the company will continue to be a market leader. “Given Tata Motors’ leadership in the commercial vehicle segment and the long-standing trust it has built with customers, the company is well-positioned to thrive. The demerger will allow greater management focus and efficiency gains, which should translate into improved profitability over time,” he said.

 

Bathini added that the demerger also opens up opportunities for better synergies, which was one of the primary reasons for this move. "It will likely take a couple of years to see the full benefits of this demerger, but the standalone focus should allow Tata CV to compete more effectively with peers like Ashok Leyland or Eicher Motors," he said.

 

On the other hand, Ravi Singh, chief research officer at Master Trust, remains cautious on short-term prospects. "If we compare Tata Motors' commercial vehicle business with peers like Ashok Leyland and Force Motors, the latter two appear more attractive at present. Tata Motors’ sales numbers are currently underwhelming, partly due to competitive pressures, discounting, and year-end stock movements, which will likely impact profit margins in the ongoing quarter.

Valuation and outlook

SBI Securities expects the stock to trade in the ₹320–₹470 range post listing, with the combined entity benefiting from global scale and technology access following the Iveco deal. While the Ebitda margin profile of Iveco and Tata Motors CV is broadly comparable, integration challenges and exposure to the global CV cycle could weigh on near-term performance.

 

However, at the current market price, it may not be feasible to invest immediately. A correction of around 5–8 per cent post-listing could make the stock more appealing for long-term investors. For those already holding Tata Motors shares, the stock could see a maximum correction to the 380–375 range, which remains attractive for a long-term horizon, Singh advised.