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Tata Motors Maintains Robust Demand for CV Despite Stagnant GDP Forecasts

News Date 13 May 2023

Tata Motors Maintains Robust Demand for CV Despite Stagnant GDP Forecasts

Tata Maintains Robust Demand Despite Stagnant GDP Forecasts

Tata Motors, one of the biggest CV manufacturers, is looking very optimistic about their sales in this new fiscal year even though many financial institutions have reduced the GDP growth forecast of the country. 

Tata Motors believes that the commercial vehicle segment will remain in a good position with respect to growth due to many factors, such as economic growth, GST collection, Infrastructure, development, and vehicle replacement demand, among others.

Mr. PB Balaji, Group Chief Financial Officer, said, "There are enough reasons to be optimistic, though I get the sentiments of the overall GDP. We obviously must be cautious. Right now, it is more about ensuring that we keep the demand going than worrying about what will happen to it. That is normal business in any case,"

According to the World Bank, the Indian GDP is expected to experience a downfall of 6.9% in FY23 to 6.3% in FY24. The reason is due to the lag impact of monetary policy tightening, increased growth uncertainty, and reduced government spending. Therefore, it may lead to local consumer constraints. Moreover, the World Bank has warned that lower-income consumers' spending will impact Financial Year 2024 because of slower income development. In addition, things related to the weather, like too much rain or too less rain or certain temperature changes, can put excess pressure on the RBI interest rates.

On the other hand, the ADB said that any deterioration of the geopolitical situation would likely put more pressure on global demand and increase uncertainty, which can be why India's slow growth rate and increased inflation. Therefore, it stays more lenient on domestic prospects, which predicts strong growth in FY24 and FY25. 

The brand management continuously says that the advance buying in Q4 FY23 happens in anticipation of price hikes because the BS VI Phase II will impact the demand. But as the Government is thrusting all the country's infrastructure projects, the brand is quite positive about the overall CV sales in FY24, despite challenges like interest rates, fuel price hikes, and continuing inflation. 

"We will continue to drive our demand-pull strategy and drive customer preference through innovation, service quality, and thematic brand activation. We will aim for higher realizations and cost savings to secure double-digit EBITDA margins for FY24 and improve the performance of all business verticals," the company said in a statement.

According to the company, the Commercial Vehicles industry continuously grows in FY23 because of the strong sales of MHCVs and the CV passenger segment. In addition, the Government's aggressive approach towards the infrastructure projects enhanced the need for heavy commercial vehicles. It increased the activities in E-Commerce, Construction & Mining became a reason to push the MHCVs sales.

On the other hand, the high-interest rates and base effect impacted the demand for small and light commercial vehicles. At the same time, export sales remain subdued due to the prevailing economic situations in most overseas markets.

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