What's Behind Tata Motors' Hike in Car and UV Prices?

Shares of auto major Tata Motors were in focus today after it was reported the company has increased prices of its cars and utility vehicles.

This is the second time the auto major is hiking its car and SUV prices as commodity prices continue to surge this year.

The automaker has increased the prices of its passenger vehicles by an average of 1.8% depending on the variant and model, effective 8 May 2021.

The company, however, will offer protection from the increase to customers who have booked Tata passenger vehicles on or before 7 May 2021.

Tata Motors had previously hiked prices of its passenger vehicle range by up to Rs 26,000, depending on the variant, from 22 January 2021.

It sells passenger vehicles ranging from the hatchback Tiago with a starting price of Rs 4.85 lakh to the SUV Safari tagged at up to Rs 21.4 lakh (ex-showroom Delhi).

The management of the company said increase in prices of commodities such as steel and precious metals, necessitates Tata Motors to pass on a part of it through rise in the price of our product.

The above move comes at a time Tata Motors is preparing to mitigate the impact of the second wave of coronavirus on its business.

It has announced business agility plans to meet the demand for its vehicles. It's working to ensure an optimal level of inventory and is planning for critical raw materials.

Apart from Tata Motors, Maruti Suzuki India Ltd, the nation's largest carmaker, too, increased prices of select models by 1.6% from April.

The company increased price of its select models by up to Rs 22,500 and said over the past year, the cost of the company's vehicles has been impacted adversely due to an increase in various input costs.

Inventory Optimisation Plan Amid Covid Surge

Tata Motors recently reported it is optimising its inventory levels as India battles the second wave of the Covid-19 pandemic.

The company said it shall ensure that optimal levels of inventory are maintained with dealers to meet whatever customer demands arise.

The company is prepared with sufficient inventory levels if there's a rebound in demand once the market situation returns to normalcy.

As per Tata Motors, the lockdown measures enforced in various parts of the country is expected to impact vehicle demand temporarily.

Hence, the company has set in motion a comprehensive 'Business Agility Plan' to protect and serve the interests of its customers, dealers, and suppliers.

The company also said it will continue to review and plan for the critical raw materials to cater to this volatile auto sector demand outlook and work closely with its vendor partners to meet the same.

Tata Motors March Performance: 505% Growth in Domestic Sales

Tata Motors had reported 505% yoy growth in total domestic sales at 66,609 units in March 2021 as compared to 11,012 units in March 2020.

The company's total passenger vehicle sales grew to 29,654 units last month, compared with 5,676 units in March 2020.

The company's PV business posted its highest ever sales in 9-years, in Q4FY21.

In FY21 the company's PV sales registered its highest ever annual sales in 8 years at 222,025 units, while posting a growth of 69% versus FY20.

In the electric vehicle (EV) segment, the company sold 4,219 units in FY21, a threefold increase over FY20.

The company also registered its highest-ever monthly and quarterly sales of 705 EVs and 1,711 EVs in Q4FY21.

We will keep you updated on how these numbers pan out in the month of April.

Equitymaster's View on Tata Motors

Here's an excerpt of what Rahul Shah, Co-head of Research at Equitymaster, wrote about the stock of Tata Motors a few months back...

• Of late, I have seen a perceptible change in the way car enthusiasts think about home grown brands, especially the ones sporting the Tata badge.
  
  They believe that Tata Motors has definitely upped its game when it comes to cars, offering a much better bang for the back in terms of safety, reliability, and style. So much so that they've even persuaded a few in the group to go for a 'Tata' as their next car.
  
  Well, it is not just in these chatrooms that Tata Motors is a hot commodity. It has also set the Indian stock market on fire with its stellar run in the last year or so.
  
  However, any strong connection between the company's share price jump and its much improved car line up should be taken with a pinch of salt.
  
  The company's car division is a small contributor to its overall fortunes.
  
  What really moves the needle for the company in terms of its fundamentals is its overseas subsidiary of Jaguar Land Rover and its commercial vehicles division.
  
  And therefore, investors should track these divisions closely if they have to take a call on the company as an investment candidate.

You can read Rahul's entire article on this topic here: Is the Tata Motors Stock Running Out of Juice?

He has also made a video on YouTube analysing Tata Motors.

Rakesh Jhunjhunwala, one of India's most successful investors, shelled out Rs 5 bn for buying Tata Motors shares a few months back and Rahul's video was about trying to understand this huge bet.

In case you haven't seen it yet, you can access it below:

How Stock Markets Reacted to the Above News for Tata Motors...

Shares of Tata Motors witnessed buying interest today and is currently trading up by 2.1% on the BSE at Rs 309 apiece.

Tata Motors share price has touched a 52-week high of Rs 357 and a 52-week low of Rs 79.

On a year to date basis, share price of Tata Motors is up 62%. Over the past one year, it has gained a whopping 267% as can be seen from the chart below.

For more details about the company, you can have a look at Tata Motors fact sheet and Tata Motors quarterly results on our website.

Happy Investing!