Tata Motors vs Maruti Suzuki: Which Auto Stock is Better?

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  
Top Ad

Find Out

How to Find One Stock with Crorepati Potential? >> READ MORE

  • Home
  • Views On News
  • Feb 21, 2022 - Tata Motors vs Maruti Suzuki: Which Auto Stock is Better?

Tata Motors vs Maruti Suzuki: Which Auto Stock is Better?

Feb 21, 2022

Tata Motors vs Maruti Suzuki: Which Auto Stock is Better?

In the past few years, the Indian automobile industry has seen a slowdown in sales.

A declining economic growth rate, higher insurance costs, road tax, and uncertainty during the BS4 transition have all contributed to the slump.

The pandemic and semiconductor crisis have only made things worse for auto companies.

Despite all these challenges, automobile companies have a positive medium term outlook.

Why?

Higher demand post-Covid for personal mobility due to safety concerns has kept the demand for passenger cars strong.

The industry is also expecting a high demand for electronic vehicles (EV).Companies are launching new models and revamping the existing ones to meet the rising demand.

Two companies who have a high chance to capitalise on this demand are Maruti Suzuki and Tata Motors.

This article compares these two companies based on their product offerings, fundamentals, profitability, and future potential to capture the rising demand.

Business Overview

Tata Motors is the automobile arm of the prestigious Tata Group.

The company designs, manufactures, assembles, and sells passenger, utility, commercial vehicles, and defence equipment.

It also offers vehicle financing, car service, spare parts and accessories.

Tata Motors also has an established presence in the global luxury car market via its subsidiary Jaguar and Land Rover.

Maruti Suzuki is a subsidiary of Japan's Suzuki Motor Corporation. It is India's largest passenger vehicle company.

It primarily manufacturers passenger and commercial vehicles in India.

However, the company also offers spare parts and accessories, vehicle financing, and insurance through its subsidiaries.

Tata Motors vs Maruti Suzuki Business Overview

  Tata Motors Maruti Suzuki
Products Cars
Sports utility
Trucks and buses
Defence
Financing
Spare parts
Service
Passenger vehicles Utility vehicles
Vans
Genuine parts and accessories
Service
Pre owned cars
Driving school
Insurance
Smart finance
Brands Indica
Harrier
Tiago
Hexa
Tigor
Nexon EV
Altroz
Xenon
Yodha
Jaguar
Land Rover
Maruti 800
Alto
Swift
Baleno
Igniz
Ciaz
S-Cross
Vitara Brezza
Wagon-R
Competitive Advantage Geographical diversification of revenue
Established market position in commercial vehicles
Market leadership in EV
Strong legacy of Jaguar Land Rover
Making affordable and fuel efficient cars
Economical after sales services and spare parts
Widest dealership network
Market leadership in passenger vehicles
Cost competitiveness
Key Risks Intense competition
Cyclicality of the industry
Intense competition
Cyclicality of the industry
Data Source: Annual Reports

Tata Motors is a market leader in the commercial vehicle segment. It also has a leading market share in India's passenger EV segment.

On the other hand, Maruti Suzuki has market leadership in passenger vehicles in India. By launching Nexa, the company set foot in the premium car market.

Revenue

In the last five years (2017-2021), the revenue of Maruti Suzuki has grown at a CAGR of 3.7%, while Tata Motors's revenue has seen a marginal de-growth of 0.8%.

The auto industry faced a slowdown post 2018. This was driven by an increase in product cost due to stringent product regulations, increased insurance premiums, and issues related to vehicle financing.

This severely impacted the revenue of both companies.

However, Maruti Suzuki's revenue saw a positive growth against a de-growth for Tata Motors. This was mainly due to its dominant position in the passenger vehicle segment, strong product portfolio, and established presence in the entry-level car market.

Tata Motors revenue was impacted mainly due to a fall in Jaguar Land Rover sales and exchange rate fluctuations.

Tata Motors vs Maruti Suzuki Revenue Growth (2016-2021)

  2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
Revenue (in m)          
Tata Motors 2,664,532 2,972,818 3,062,338 2,643,384 2,555,873
Maruti Suzuki 612,468 797,226 887,522 789,944 733,083
Revenue Growth (%)          
Tata Motors   11.6% 3.0% -13.7% -3.3%
Maruti Suzuki   30.2% 11.3% -11.0% -7.2%
Source: Equitymaster

Sales Volume

In the last five years, the sales volumes of both Tata Motors and Maruti Suzuki have seen a de-growth of 5.2% and 1.5%, respectively.

Tata Motors vs Maruti Suzuki Sales Volume Growth (2016-2021)

  2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
Sales Volume (in lakhs)          
Tata Motors 11 12 13 10 8
Maruti Suzuki 16 18 19 16 15
Sales Volume Growth (%)          
Tata Motors   11.9% 4.3% -24.6% -12.9%
Maruti Suzuki   13.5% 4.7% -16.1% -6.8%
Data Source: Company Website

Tata Motors sales volume fell due to slower than usual economic activity, increased axle load norms, and transition to BS4 to BS6.

The pandemic also further slowed down the production of commercial vehicles.

However, the growing share of passenger vehicles slightly offset this with new product launches in the domestic market.

Maruti Suzuki sales volume was impacted by failing launches in the compact SUV, sedan, and entry-level car segments.

Market Share

Maruti Suzuki has the highest market share (43.5%) in the passenger vehicles market in India. Its next closest competitor Hyundai has around 15% market share, followed by Tata Motors with 12%.

Its ability to manufacture affordable and fuel-efficient cars, its wide distribution network and after-sales services have also helped it retain its market share.

Tata Motors vs Maruti Suzuki Market Share April-December 2021

Market Share Tata Motors Maruti Suzuki
Passenger Vehicles 12% 43.50%
Commercial Vehicles 45.50% 4.90%
Data Source: Company Website

On the other hand, Tata Motors is a market leader in the commercial vehicles segment with a market share of 45.5% in India.

An extensive service network along the length and breadth of the country and strong brand loyalty from its customers has helped the company maintain its leadership in the segment.

Tata Motors share in the passenger vehicles segment has seen a steep growth from 6% a few years ago to 12% in December 2021.

This was mainly due to the success of its new product launches, focused action in targeted micro-markets and growth in the EV segment.

Profit margins

Operating profit margin indicates what percentage of the operating revenue is the profit after paying for all operating expenses.

Maruti Suzuki is leading with a five-year average operating profit margin of 12.5% against 6.3 % of Tata Motors.

Tata Motors vs Maruti Suzuki Profit Margins (2016-2021)

  2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
Operating Profit Margin (%)          
Tata Motors 11.3% 10.6% -2.1% 5.7% 6.2%
Maruti Suzuki 17.4% 15.4% 12.6% 9.7% 7.6%
Net Profit Margin (%)          
Tata Motors 2.3% 2.3% -9.6% -4.2% -5.2%
Maruti Suzuki 12.5% 9.9% 8.7% 7.3% 6%
Source: Equitymaster

Maruti Suzuki is again leading with a five-year average net profit margin of 8.9%. On the other hand, Tata Motors has a five-year average net loss margin of 2.9%.

Maruti Suzuki's profit margins are higher than Tata Motors mainly due to the cost reduction initiatives taken by the company, low-interest expenses and an increase in selling prices to offset commodity inflation.

Tata Motors profit margins are impacted by the increasing cost of raw materials, especially steel, and the low increase in selling prices.

Manufacturing facilities

Tata Motors has nine manufacturing facilities with a capacity to produce 0.48 m units per annum.

The company is also home to the country's biggest engine development facility. It also has its own climate and pedestrian testing facility.

On the other hand, Maruti Suzuki has two state-of-the-art manufacturing facilities with a capacity to produce 1.5 m units per annum.

To cater to the increasing market demand, a manufacturing facility with 0.25 m units capacity has been set up, taking the total capacity of Suzuki Motor Gujarat Private Limited (SMG) to 0.75 m units.

SMG, a subsidiary of Suzuki Motor Corporation, is being set up to manufacture cars for Maruti Suzuki in India.

Distribution network

Maruti Suzuki has the widest distribution network among all the automobile companies in India. It has over 4,000 touchpoints across 2,014 cities in India.

The company also has a doorstep service facility in over 130 cities and quick response teams in over 32 cities.

On the other hand, Tata Motors has 8,800 touchpoints in over 125 countries.

With a diverse geographical presence, Tata Motors has the added advantage of understanding customer expectations from diverse backgrounds enabling it to cater to ever-changing consumer preferences.

Research & Development

Tata Motors has 11 research and development facilities in the country. During the financial year 2021, the company filed for 89 patents.

It also has access to Jaguar Land Rover's technological capabilities, aiding it in bringing world-class innovation to its products.

On the other hand, Maruti Suzuki has two research and development facilities in India that are supported by its parent organization Suzuki Motor Corporation.

During the financial year 2021, the company filed for 110 patents and also got approval for 31 patents.

Dividends

A company shares profits with its shareholders in the form of dividends. Dividends can be in the form of cash or stock.

Dividend ratios such as dividend payout ratio and dividend yield can be used to compare both companies' dividends.

The dividend payout ratio determines how much dividend is paid from the earnings. In contrast, the dividend yield tells us what percentage of the share price is the dividend amount paid on a per-share basis.

The higher the ratios, the better.

Tata Motors vs Maruti Suzuki Dividend Ratios (2016-2021)

  2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
Dividend Payout Ratio (%)          
Tata Motors 0% 0% 0% 0% 0%
Maruti Suzuki 30.9% 31.3% 32.2% 32.6% 32.2%
Average Dividend Yield (%)          
Tata Motors 0% 0% 0% 0% 0%
Maruti Suzuki 1.6% 1% 1% 1% 0.7%
Source: Equitymaster

Maruti Suzuki has consistently paid dividends to its shareholders for the last five years. Its five-year average dividend payout stands at 31.8%, while its five-year average dividend yield stands at 1.1%. Lower debt has enabled the company to pay a consistent dividend to its shareholders.

On the other hand, Tata Motors hasn't paid any dividends to its shareholders in the last five years.

Inventory days

Inventory days measures the time taken by the company to convert its inventory into sales. Tata Motors and Maruti Suzuki's 5-year average inventory days are 60 and 21 days, respectively.

Tata Motors vs Maruti Suzuki Inventory Days (2016-2021)

Inventory Days 2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
Tata Motors 53 56 54 63 75
Maruti Suzuki 18 21 19 23 23
Source: Equitymaster

Maruti Suzuki is more efficient in managing its inventory and has a better sales performance than Tata Motors.

Debt-to-equity ratio

The debt-to-equity ratio shows how much leverage a company is using-the lower the debt, the better the company's risk profile.

Tata Motors vs Maruti Suzuki Debt to Equity Ratio (2016-2021)

Debt to Equity Ratio 2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
Tata Motors 1 0.6 1.2 1.3 1.7
Maruti Suzuki 0 0 0 0 0
Source: Equitymaster

Tata Motors had a debt to equity ratio of 1.7x in the financial year 2021 while Maruti Suzuki is a debt-free company.

Strong cash flows and support from its parent company have enabled Maruti Suzuki to run debt-free. . Tata Motors aims to become net debt-free by 2024.

Return on capital employed (ROCE)

Return on capital employed measures the company's efficiency in generating profit from the capital invested.

The five-year average ROCE for Maruti Suzuki stands at 20.1%. For Tata Motors, the five-year average ROCE is slightly below zero. However, the ratio has been improving over the last three years.

Tata Motors vs Maruti Suzuki Return on Capital Employed (2016-2021)

ROCE (%) 2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
Tata Motors 11.4% 10.1% -19.6% -2.3% -1.6%
Maruti Suzuki 27.1% 26.7% 22.4% 14.4% 10%
Source: Equitymaster

Maruti Suzuki is doing better at generating profit on the capital invested than Tata Motors.

Return on equity (RoE)

Return on equity (RoE) measures how efficiently the company uses its equity capital to generate profit.

The five-year average ROE of Maruti Suzuki stands at 14.6%. For Tata Motors, higher commodity prices have kept the ROE below zero.

Tata Motors vs Maruti Suzuki Return on Equity (2016-2021)

ROE (%) 2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
Tata Motors 10.4% 7.1% -48.1% -17.6% -23.6%
Maruti Suzuki 19.8% 18.1% 15.9% 11.3% 8%
Source: Equitymaster

Again, Maruti Suzuki has been more effective in terms of generating returns for its shareholders than Tata Motors.

Valuations

Price to Earnings ratio (P/E) and Price to Book Value (P/BV) are valuation ratios used by analysts to determine the relative value of a stock.

PE ratio uses the company's earnings to determine how much a shareholder is willing to invest against one rupee of earnings.

P/BV ratio, on the other hand, uses a company's book value to determine how much a shareholder is willing to pay against one rupee of book value.

Maruti Suzuki's P/E and P/BV ratios stood at 44.4 and 3.6, respectively, for the financial year 2021. For the last five years, the average is 32.1 and 4.4, respectively.

For Tata Motors, the P/E for the financial year 2021 is below zero due to losses. Its P/BV stand at 1.5 for the financial year 2021. The five-year average P/E and P/BV are 6.6 and 1.6, respectively.

Tata Motors vs Maruti Suzuki Valuation Ratios (2020-2021)

  P/BV Ratio 5 year average P/BV Average P/E Ratio 5 year average PE
Tata Motors 1.5 1.6 -6.2 6.6
Maruti Suzuki 3.6 4.4 44.4 32.1
Source: Equitymaster

Maruti Suzuki's shares are trading at a premium when compared to Tata Motors in terms of both P/E and P/BV.

Apart from P/E and P/BV, another very popular valuation for making an investment decision is EV/EBITDA. It measures the value of the company by considering its true earnings.

Lower the number, the more attractive the investment for takeover.

Tata Motors vs Maruti Suzuki EV/EBITDA (2016-2021)

EV/EBITDA 2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
Tata Motors 6.6 4.7 4.8 5.3 5.9
Maruti Suzuki 14.4 19 14.9 12.2 24.7
Data Source: Ace Equity

Tata Motors is cheaper than Maruti Suzuki, making it a better option for a takeover in the near term.

Sustainability efforts

The automobile industry's contribution to greenhouse gases has always been on the higher side. However, with changing times, the industry is developing more environmental-friendly products to address the climate change issue.

Electric vehicles and compressed natural gas (CNG) engines have been on the rise and both companies have been investing in the same.

Tata Motors has taken initiatives to reduce its consumption of natural resources such as water and move towards renewable energy. It is also using innovative methods to limit and control waste generation.

Maruti Suzuki, on the other hand, has been using eco-friendly vehicles in manufacturing since 2005 to reduce carbon emissions. The company is also extensively using railways to transport its products.

It has also set up a vehicle scrapping and recycling facility in Noida to create an ecosystem that phases out unfit automobiles out of the Indian roads.

Impact of Covid

The manufacturing of automobiles completely shut down during the lockdown in March 2020. As a result, both the revenue and volumes of both companies were impacted.

In addition to this, shortage of labour, logistics and semiconductor chips created supply-side bottlenecks.

However, as the economy opened up for normal operations, the demand for passenger vehicles quickly picked up.

The need for personal mobility post-Covid-19 drove the demand.

Despite the recovery in the economy, the volumes of Tata Motors and Maruti Suzuki fell by 13% and 7%, respectively in the financial year 2021.

The companies were able to cut down on some costs during the lockdown, but that was negated with the increase in commodity costs.

As a result, the profit margins of the companies declined too.

However, going forward, the demand for passenger vehicles and commercial vehicles is expected to be high on account of economic recovery.

Electric Vehicle Revolution

Electric mobility is gaining traction all over the world. Raising concerns over the environment has led to the faster adoption of EVs.

Even the governments of several countries have been taking initiatives to ensure a smoother shift to EVs.

India is not alien to this emerging trend.

Being the fifth largest passenger vehicle manufacturer globally, India is also witnessing rapid EV growth.

Tata Motors is already a dominant player in the EV segment. The company has the highest market share (65%) in the passenger EV segment and recently completed selling its 10,000th EV.

It is also manufacturing electric buses and is securing orders from several state transport entities.

Along with its group peers such as Tata Power and Tata Chemical, it is also developing Indian EV infrastructure.

On the other hand, Maruti Suzuki has no plans to launch its first EV before 2025. This is mainly because the company believes the transition to EVs will be gradual.

Hence, the company is focusing on hybrid models by manufacturing normal and CNG engine cars and promoting them.

However, the company is not completely ignoring this emerging technology. Its parent organisation, Suzuki Motor Corporation, is developing a battery manufacturing ecosystem in India.

The company aims to set up first India's cell level lithium battery manufacturing and recycling of lithium-ion batteries.

Tata Motors has the edge over Maruti Suzuki when it comes to EV and related technology.

Future Prospects

The pandemic has increased the need for personal mobility. People prefer to travel by their own vehicles than use public transport in these uncertain times to ensure maximum safety.

Apart from this, an increase in disposable income and pent up demand will also drive the demand for automobiles.

Both Tata Motors and Maruti Suzuki are dominant players in their respective fields and set to benefit from this rising demand.

However, a few supply-side bottlenecks might keep both the companies' production and sales volume on the lower side for the next 12-18 months.

Shortage of semiconductors has led to slower growth in production while rising commodity prices have led to higher costs.

However, as the semiconductor crisis ease and commodity prices stabilise, both the companies will see strong growth in revenue and margins.

Which is better?

Maruti Suzuki has more stability in its financials when compared to Tata Motors.

Maruti Suzuki is doing a better job than Tata Motors in terms of revenue, volumes, profit margins, leverage, and return to shareholders.

It is also leading in terms of dividends and operational efficiency.

However, in terms of valuations, Tata Motors shares are slightly cheaper when compared to the shares of Maruti Suzuki.

Tata Motors also has the edge over Maruti in terms of geographical diversification, electric mobility, and related technology.

Before investing in any of these stocks, ensure you check the company's fundamentals and understand what are its future prospects.

You can also check the valuations of the companies before taking a call.

Still confused which is better?

Use our feature-rich comparison tool, which draws a detailed comparison between any two companies. This tool also includes a graphical analysis making it easy to see trends!

Tata Motors vs Maruti Suzuki

You can also compare both the companies with their peers.

Tata Motors vs Ashok Leyland

Maruti Suzuki vs Mahindra & Mahindra

Tata Motors vs Force Motors

Maruti Suzuki vs Hindustan Motors

Check out Tata Motor's factsheet and Maruti Suzuki's factsheet for a detailed analysis.

You can also check out the latest quarterly results for Tata Motors and Maruti Suzuki.

Since stocks from the automobile sector interest you, check out Equitymaster's powerful Indian stock screener tool to find the top automobile companies in India.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...

Equitymaster requests your view! Post a comment on "Tata Motors vs Maruti Suzuki: Which Auto Stock is Better?". Click here!

  

More Views on News

TATA MOTORS 2021-22 Annual Report Analysis (Annual Result Update)

Jun 20, 2022

Here's an analysis of the annual report of TATA MOTORS for 2021-22. It includes a full income statement, balance sheet and cash flow analysis of TATA MOTORS. Also includes updates on the valuation of TATA MOTORS.

India's Top EV Stocks: Generating Returns for Investors? (Views On News)

Jun 10, 2022

We look at the top EV stocks from each space and the returns they are generating for investors.

What to Expect from India's Top EV Stocks in 2022 (Views On News)

Feb 8, 2022

Check out what the future of these top electric vehicle (EV) stocks looks like.

How India's Best 2-Wheeler EV Stocks are Powering Ahead (Views On News)

Apr 12, 2022

These stocks have the potential to gain from India's expanding electric two-wheeler market.

The Game Changer - This Company's EV Battery Charger takes only 15 Minutes for a Full Charge (Views On News)

Feb 10, 2022

The number one barrier to the adoption of EVs is no longer just cost, it is Range anxiety. But what if the experience of a driver is exactly like fuelling a petrol or diesel car?

More Views on News

Most Popular

4 Sectors to Watch for Future Multibagger Stocks (Views On News)

Jun 17, 2022

With India's economic recovery accelerating, these sectors are likely to give multibagger returns in the future.

Why Tata Power Share Price is Falling (Views On News)

Jun 14, 2022

Here's why shares of Tata Power have fallen in recent days.

Is it Time to Start Buying Stocks Selectively? (Profit Hunter)

Jun 16, 2022

Some sectors have corrected by 50%. Do they merit a look?

Best Monopoly Stocks to Own in 2022 Views On News (Views On News)

Jun 18, 2022

Constant product innovation, latest technology, strong supply chain etc can all help companies enjoy monopoly like fortunes.

When Will the Stock Market Recover? (Views On News)

Jun 15, 2022

This is how you can tell the market is going to recover.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

TATA MOTORS SHARE PRICE


Jun 24, 2022 (Close)

TRACK TATA MOTORS

  • Track your investment in TATA MOTORS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

TATA MOTORS - SML ISUZU COMPARISON

COMPARE TATA MOTORS WITH

MARKET STATS