Tata Motors’ Global Dec 2012 Wholesales Disappoint

Tata Motors announced its global wholesales for the month of Dec 2012. In the markets, the stock dived down to an intraday low of Rs 321.80 per share (a decline of 2.71%), which is indicative of how the numbers were. Overall, the global wholesales for the company declined by 13.88% in Dec 2012 as compared to the previous year.

*Minus numbers for distribution of Fiat cars in India as the agreement was discontinued in mid-2012.

The major drag on the overall wholesales was the sales of its Passenger Vehicles, which declined by 50.50% in Dec 2012 on a yearly basis. The domestic performance of Tata’s Passenger Vehicles, which account to more than 95% of its global sales, has been responsible for this drastic downfall. Subdued macroeconomic trends, high interest rates and soaring fuel prices caused the domestic sales in this segment to plummet by 50.94% in Dec 2012.

In fact, the outlook for the entire automobile industry has been bleak because these factors. The festive season was where manufacturers expected a turnaround in the trend. However, that failed to happen. Moreover, even the heavy discounts offered in the month failed to woo customers. To further boost sales, auto makers also announced in Dec 2012 that they would be raising prices in Jan 2013. The first one to do so was Maruti Suzuki, which announced a price hike of up to Rs 20000, effective today (Jan 16).

Apart from the rise in car prices, consistently soaring fuel prices have also been taking a toll on the overall sales. Petrol prices have been further raised by 35 paise per litre, effective today (Jan 16, 2013). The disparity in petrol and diesel prices had been causing new car sales to be heavily skewed towards diesel models. However, the planned diesel price increases and additional duties on diesel vehicles have the potential to further hamper sales. The only hope for the industry now lies in an interest rate trend reversal.

Coming back to Tata Motors, the volume growth in global wholesales for CY12 is flattish compared to the previous year, with a mild increase of 1.80%. The YoY growth in Commercial Vehicles and Passenger Vehicles is seen at a modest 2.58% and 1.05% respectively.

However, this cheerless story has a silver lining. The company’s Passenger Vehicles segment has been largely supported by the 18.16% growth in the sales of Jaguar Land Rover. Overall, JLR contributes to 65%-70% of Tata Motor’s consolidated revenues and more than 90% of its consolidated profits. Although the overall numbers seem to be a drag, the 18.16% jump in volumes for JLR over 2012 are expected to boost the financials of Tata Motors.