PV or CV at TN plant? Tata Motors will take a call based on market trend

Tata Motors will soon submit a detailed report on the upcoming manufacturing plant in Tamil Nadu’s Ranipet district and a decision, on whether the facility will churn out passenger or commercial vehicles, will be taken by the company on the basis of market trends, state’s industries minister TRB Rajaa said on Thursday.

“They are keeping the options open, and market trends will determine it (the type of vehicles the plant will make). They will quickly come up with a detailed report on that,” Rajaa said.

ALSO READ: Tata Motors to set up manufacturing unit in Tamil Nadu, invest Rs 9,000 cr

 

Tata Motors, meanwhile, have refused to comment on the issue.

Tata Motors and the Tamil Nadu government signed a memorandum of understanding on Wednesday to set up a manufacturing unit in Ranipet near Vellore with an investment of Rs 9,000 crore. The unit is expected to generate over 5,000 jobs in the state, over a period of five years.

Tata Motors board has recently approved the proposal to demerge TML into two separate listed companies housing the CV business and its related investments in one entity, and the PV businesses including domestic PV, electric vehicle (EV), and Jaguar Land Rover (JLR) and its related investments in another entity.

In February, Tata Motors surpassed Hyundai to claim the number two spot in the domestic passenger vehicle (PV) market, selling 51,267 units, a growth of 20 percent YoY.

However, commercial vehicle (CV) sales have declined by 4 per cent last month. Tata’s EV sales were seen at 6,923 units in February this year as against 5,318 units in the same period last year, posting a 30 percent increase.

Analysts believe that CVs are expected to enter a downcycle in FY25.

ICRA analysis showed that while the CV industry is expected to end the 2023-24 fiscal with a 2-5 percent growth in volumes; in FY25 this would moderate to a negative 4-7 percent, or a decline.

Typically, the demand pattern in the CV industry is cyclical -- a period of three upcycles is followed by two years of downcycle.

Analysts thus felt that Tata Motors would take a cautious call.

ALSO READ: Tata Motors to hike commercial vehicle prices by up to 2% from April 1

“Usually companies create capacities during a downcycle, in order to be prepared for the demand uptick before an upcycle begins,” said an industry analyst.

As such Tata Motors CV capacity utilisation around November-December was around 60 percent or so.

The state authorities, meanwhile, said that the government has lined up a host of incentives for the automobile majors to bring in investment to the state.

“We are giving the best incentives. Companies like Tata Motors don’t just come to a state only because of incentives. They also look at the kind eco-system that is available. Tamil Nadu is a very rich state in terms of automobile ecosystem. That is a bigger incentive for anybody than financial incentive,” Rajaa added.

The state has witnessed two mega investments within a span of two months. The first one came in the form of Vietnam-based EV player VinFast, a rival of Tesla in the global market, starting work on its Rs 16,000 crore EV manufacturing facility at Thoothukudi in Tamil Nadu.