Mumbai: Tata Motors is looking for partnerships to lessen the financial burden, said chairman N Chandrasekaran, projecting the effects the company has faced by the continuing volume slowdown and mounting losses at its British arm, JLR.
Addressing the shareholders at the 74th AGM, the chairman, however, pointed out that the automobile sector is such that a company cannot shut the cash tap as the very nature of this business demands continuous investment in product and technology development.
On the uncertainty on Brexit, Chandra said more than the final outcome of the exit of Britain from the EU, it’s the uncertainty that is hurting JLR in its home market and continental Europe, which is the largest source market for the millions of components that JLR procures annually.
“The only way to handle the ongoing crisis and the continuing need for large capex is additional investment through partnerships, because we want to spread the investment, which cannot be shut either. There are many discussions from tactical to strategic for such partnerships. Opportunities are coming and we keep evaluating them. We’ll forge such partnerships so that we are able to address the capex issue,” Chandra told the shareholders.
The woes at JLR, which used to be the cash-cow for years for Tata Motors, its bottomline has been sinking for the past three successive quarters. Tata Motors last week reported a net loss of Rs 3,679 crore for the June quarter, against Rs 1,862 crore loss in March.
“Our focus should be to continuously press operational efficiency, forge partnerships so that the capex can be optimised in any form of the partnership that makes sense and that get the volume pick up. Honestly speaking, the issue is in terms of sales. We need to pick up sales. But otherwise if you take the debt, the domestic business has got Rs 15,000-16,000 crore, roughly 2.5 times the EBITDA, but the JLR debt apart from working capital is completely sustainable,” Chandra said.
But there is a silver lining in China as “for the first time in 12 months, we are seeing a positive volume growth in China in July after a recovery in June. But we need to wait for a couple of more months to see whether there’s a trend”.
He said during the past 12-18 months, JLR has cut down capex from around 4.5 billion pounds to 3.9 billion pounds. “And we are working towards cutting down further, but we can’t take a very drastic cut.”
Chandra said Tata Motors has made big investment in electric vehicles business and that it plans to have EVs of the four existing models, of which the hatchback Tigor is already commercially available. The next EV model will be Nexon, which is expected to be launched around January, he said, adding then Altroz and followed by one more.
“There are four models that we plan as of now. We not only have to create the models, but we have to create EV infrastructure as well for which Tata Motors and Tata Power are working closely. We plan to put EV infrastructure in at least 25 cities. We need to create this demand as well.”