High-end SUVs Drive Tata Motors Profit

Measures to reduce costs and lower break-even volume at JLR boost bottomline.

- KARAN DHAR

#7 BIGGEST GAINER - LOSS TO PROFIT

TATA MOTORS

WHEN TATA MOTORS acquired British luxury carmaker Jaguar Land Rover (JLR) from Ford for $2.3 billion a decade and a half ago, analysts were sceptical. It was the year of the global financial crisis and demand for luxury cars had taken a beating. But against all odds, the Tata Group company went from ₹2,500 crore loss in FY09 to ₹13,986 crore in profits in FY15.

The euphoria, however, was shortlived. The homegrown automaker recorded the biggest-ever quarterly loss (₹26,961 crore) by an Indian company in Q3FY19. The losses continued through the pandemic as disruptions in the global supply chain led to a semiconductor crisis, causing a decline in volumes. The huge leverage on its books didn't help JLR either. As the chip shortage abated in the second half of 2023, volumes picked up and the company swung back to profits again.

JLR halved its break-even volume threshold to 300,000 units in FY23, from 600,000 in FY19, thanks to its focus on high-margin SUVs. Profitable cars, including Range Rover, Range Rover Sport and Defender, contributed 77% to the 168,000 order-book at the end of Q2FY24. To overcome supply chain disruptions, Tata Motors is redesigning vehicles to reduce dependency on semiconductors. The automaker is also forging alliances with chipmakers to ensure a steady supply.

The Tata Group firm clocked its fourth straight quarterly profit in the September quarter, driven by strong JLR sales. Its luxury unit's revenue grew 30% to £6.9 billion in Q2 and net debt halved to £2.2 billion in the 12 months to September 2023. JLR aims to slash it to less than £1 billion by the end of FY24 and become net cash positive by FY25.