Commodity cost uncertainty bigger worry than increase itself: TMPV MD

TMPV chief Shailesh Chandra said commodity pressures were hurting margins and forcing faster cost cuts, while EV demand continued to outpace supply

The uncertainty over how long commodity costs will remain under pressure is a greater worry for Tata Motors Passenger Vehicles (TMPV) than the increase in costs itself, its managing director and chief executive officer Shailesh Chandra said on Friday.

 

He said commodity prices had risen significantly over the past five-six months and that the company could not pass on the increases to customers at the same pace. He, however, said there was no major production or supply-side concern at present.

 

“Cost side is impacted significantly. I've been talking about it. I'm sure all the other manufacturers would be talking about the significant rise in commodity prices. A lot of it got triggered because of certain events which have happened in the past 5-6 months. And it continues to be a matter of concern,” he said during a media roundtable on the sidelines of the launch of compact sedan Aeris.

  

TMPV's consolidated revenue rose 9.3 per cent year-on-year (Y-o-Y) to ₹95,800 crore in the first quarter of 2026-27, while net profit fell 80.3 per cent Y-o-Y to ₹775 crore.

 

The company attributed the profit decline mainly to lower JLR wholesales due to temporary supply constraints and West Asia-related disruption, along with elevated commodity costs that offset strong growth in the India passenger vehicle (PV) business.

 

Israel and the US conducted military strikes on Iran on February 28, igniting a fresh conflict in West Asia that has disrupted global fuel supply and elevated commodity costs.

 

In the latest development, Iran-backed Houthi forces on September 10 seized Yemen’s Mokha port and intensified attacks on Red Sea shipping, pushing Brent crude up 5.3 per cent to $106.60 a barrel intraday and above $100 for the first time since May, as markets feared further disruption to oil supplies through the Bab el-Mandeb Strait.

 

TMPV's managing director said on Friday that the cost pressure was affecting margins while also requiring a faster cost-reduction effort.

 

TMPV has an established, or “institutionalised”, process to reduce costs, but Chandra said the pace required now was much higher.

 

He said the bigger issue was uncertainty around commodity prices, as different commodities could move in different directions depending on oil prices.

 

Oil prices affect the cost of several industrial materials and, therefore, make it harder for automakers to estimate how long the pressure will last.

 

“The greater worry is the uncertainty bit of it...The basket of commodities (which TMPV consumes) that we have, all move in different directions depending on how the oil prices are also moving,” he noted.

 

When asked to quantify the commodity impact, Chandra said the earlier impact had been around 4 per cent of revenue and that the latest quarter could see another increase of around 3 per cent, with a variation of 0.5 percentage point either way.

 

Chandra, however, said he did not see a major production or supply concern at present.

 

He pointed to early signs of pressure on semiconductors, or chips used in vehicles, due to rising demand linked to artificial intelligence, but said Tata had mitigation measures in place.

 

“I would not raise any big alert on the supply or production side as yet. Definitely, the semiconductors and chips will come under pressure because of another mega trend on the AI side (more data centres being built by global tech giants). But not something to be alerted as a big issue at this stage," he noted.

 

On electric vehicles, Chandra said Tata's EV penetration had risen to around 25 per cent this year from about 14 per cent last year.

 

The company had increased monthly EV production from around 7,500-8,000 units last year to more than 16,000 units currently.

 

He said the company was still unable to fully meet demand.

 

EV bookings, which show customer demand before delivery, had crossed 30 per cent, while supply was not keeping pace. He said the company was increasing production every month, but declined to give a future capacity target.

 

Chandra also said industry-wide EV penetration had risen from around 4.5 per cent last year to 8 per cent now and could reach double digits next financial year.

 

He said this could have happened already if supply had been able to keep pace with demand.

 

The supply constraint, he explained, was largely at the supplier level rather than Tata's own manufacturing facilities.

 

Tata has flexible manufacturing capacity, meaning production can be shifted between different products. But suppliers need long lead times, often one to one-and-a-half years, to add machines and capacity.

 

On Aeris, Chandra said Tata had developed the new compact sedan specifically for personal buyers, while the fleet market would be served by its other sedan model, Xpres.

 

He said the compact-sedan market was around 350,000 units a year, with personal buyers accounting for 65 per cent and fleet customers 35 per cent.

 

The company has moved away from the Tigor nameplate as part of this strategy.

 

Aeris will initially be offered with petrol and CNG powertrains.

 

CNG, or compressed natural gas, accounts for nearly 60 per cent of compact-sedan industry volumes, according to Chandra, while penetration is around 53 per cent among personal buyers.

 

Aeris has also been configured for an electric powertrain, but Tata is waiting for the ₹8-15 lakh price segment to become larger before deciding on an electric version.

 

Chandra said Tata already has three EVs — Tiago, Punch and Nexon — in this price range and does not want to add another model before demand is large enough.

 

He said the compact-sedan segment had grown around 25-26 per cent in volume over the past year, although its share of the overall passenger-vehicle market had continued to decline as customers shifted towards SUVs.

 

Aeris is, therefore, intended to bring more design, technology, comfort and safety to a segment that Tata believes has lost some customers to SUVs.

 

Chandra said the compact sedan remains particularly relevant in smaller cities and rural markets, where its combination of size, price and ground clearance can offer an aspirational upgrade over a hatchback.