Tata Motors, Tata AutoComp hit a patchy road in FY25 as challenges mount

Mint

a day ago

For Tata Group chairperson N. Chandrasekaran, Tata Motors Ltd has been one of the conglomerate's standout performers in recent years—rising to third spot in a market dominated by Maruti Suzuki India Ltd and Hyundai Motor India Ltd.
In Chandrasekaran's letter to shareholders as part of Tata Group's holding company Tata Sons' latest annual report, the auto business found a special mention.
'Let me pause and mention one example that exemplifies the best of what we can do: Tata Motors,' Chandrasekaran said in his letter.
'With barely 5% share in passenger vehicles in 2017, it seemed an implausible idea that Tata Motors could launch India's first electric vehicle in under one year from design to production, that its market position could rise from 6th to top-3 in the Indian market, that it could transform from a debt of INR 62,000 Cr to net cash positive status,' he wrote.
However, some wrinkles are appearing in the Tata Group's auto business, which may worry Chandrasekaran, who heads the board of the Mumbai-based Tata Motors.
After nearly four years of rapid growth post the covid-19 pandemic, growth momentum for Tata Group's two flagship auto businesses—the publicly listed Tata Motors and the privately held Tata AutoComp Systems Ltd—is faltering.
Tata Motors is in the business of making and selling automobiles in the domestic and international markets, while Tata AutoComp manufactures auto components.
The two businesses saw their profit drop in financial year 2025 amid rising competition and declining growth in both domestic and international auto markets.
While Tata Motors saw its consolidated FY25 net profit fall by 12% to ₹ 28,149 crore for the first time in four years, Tata AutoComp's net profit nearly halved to ₹ 735 crore, Tata Sons' latest annual report revealed.
Tata Motors consolidated revenue war largely flat year-on-year in FY25 at ₹ 4.39 trillion. However, for the first time since the financial year 2020, Tata AutoComp's revenue declined to ₹ 13,095 crore in FY25 from ₹ 13,722 crore in the year before.
With both automobile and auto parts businesses facing headwinds owing to US tariff threats and slowing growth, analyst projections for this year are not rosy for the conglomerate's auto business.
Analysts highlighted the slowdown in the performance of Jaguar Land Rover which will impact Tata Motors as nearly three-fourth of its consolidated revenue and profit come from the UK-based company.
'We are building in a subdued 3% revenue CAGR over FY25–27E owing to volume decrease at JLR (3% CAGR) and muted growth in the India CV (2% CAGR) division,' analysts at Nuvama Institutional Equities wrote in a 16 June Note on the performance of Tata Motors.
'In JLR, discontinuance of 'Jaguar' ICE models, loss of market share in the China region and imposition of tariffs in the US shall lead to volume contraction ahead. Furthermore, we reckon a muted performance in the India CV division owing to reasonable utilisation levels at transporters, increasing competition from Railways and a high base.'
In the financial year 2025, Tata Motors saw total passenger and commercial vehicle sales fall by 4% to 912,155 units. JLR is facing a tough operational environment as the company has to pay higher tariffs in its biggest market, North America, while its third biggest market, China, has increased the net of luxury tax on cars.
During April-June, the first quarter of this FY, the maker of Range Rover SUVs sold 87,286 units, 11% fewer than a year ago, due to a pause in shipments to the US in April to assess the tariff impact.
With Tata Motors' overall financials dependent on the performance of the UK-based company, the going may get tougher.
Muted performance of the automobile business could weigh on Tata AutoComp which gets nearly one third of its revenue from Tata Group entities. The manufacturer of auto components, which was founded in 1995, has nearly 61 plants across India, North America, Latin America, Europe and China.
The company is currently headed by Manoj Kolhatkar, who joined in December after a 13-year stint at Gabriel India.
Components players are already facing several headwinds during the current financial year. Analysts note that the growth environment for the country's auto component players is becoming increasingly challenging.
'We identify three key risks for Ancs- USMCA/tariffs (ancillaries - US Mexico Canada Agreememt), EU weakness and Chinese competition, and EVs – given the industry's export reliance on US/EU and good salience of engine components,' analysts at Ambit Institutional Equities wrote in a 25 April note.
Being privately held, the component business is spared the scrutiny of public investors. However, shares of Tata Motors have lagged the overall market so far in 2025. The share price of Tata Motors has declined by 6%, while Nifty Auto has risen by 4% so far this calendar year.
However, for Chandrasekaran, the story of turnaround in the automobile business, which led to the strong growth, is still notable. During the company's annual general meeting held in June, the chairperson had a message for the shareholders of its flagship auto business.
'I had the opportunity to constantly share updates with Ratan Tata about the business in the last few years. While we all miss him, I want you to know that he would have been very proud of the turnaround of the business as Tata Motors was very close to his heart,' Chandrasekaran told shareholders.