Tata Motors is gearing up to launch a facelift of its Nexon model, which includes both internal combustion engine and electric vehicle variants. This move comes as the competition in India’s sport utility vehicle (SUV) segment intensifies. While the revamped Nexon is expected to offer many segment-first features and a more sophisticated experience, analysts suggest that it may not significantly increase Tata Motors’ market share in the SUV segment, but it can help the automaker maintain its current position.
Tata Motors faces tough competition from peers such as Mahindra & Mahindra and Maruti Suzuki, both of which have established a strong presence in the SUV segment with offerings like the XUV300 and Brezza, respectively. Despite this, Tata Motors’ domestic market share in the passenger vehicle segment has shown improvement, reaching 14.2% in the first quarter of FY24, compared to 13.5% in FY23.
However, the company’s primary concern remains the declining market share in the commercial vehicle business. In Q1 FY24, Tata Motors’ market share in this segment fell to 39.1%, a drop of 260 basis points from the levels seen in FY23. A positive turnaround in the commercial vehicle business would be crucial for boosting investor sentiment towards Tata Motors’ stock.
While Tata Motors has delivered substantial gains for investors, with the stock rising nearly 64% in 2023, outpacing the Nifty Auto index, it needs to maintain its momentum. The performance of its British subsidiary, Jaguar Land Rover Automotive Plc (JLR), has been a key driver of sentiment for the stock.
In Q2, JLR’s volume and profitability are expected to be in line with recent quarters, with production and cash flow potentially impacted by the annual summer plant shutdown. JLR aims to achieve an Ebit margin target of over 6% in FY24, but the favourable mix it currently enjoys may not last as supply chain constraints gradually ease. Additionally, JLR’s transition to electric vehicles could initially weigh on profitability.
Overall, while Tata Motors’ investors have seen considerable optimism, future upside will depend on the trajectory of volumes across its major businesses and margin performance. The successful launch of new models, such as the Nexon facelift, will play a pivotal role in sustaining the company’s growth in a competitive market.
