Tata Motors has lined up Rs 3,000 – Rs 3,500 crore capital expenditure for FY22 for its India business following a sustained multi-quarter rise in sales especially for its SUVs and cars where its dealers are struggling to meet retail demand.
The outlook on capex for FY22 marks a massive jump from the guidance provided in previous quarters for FY21 which was supposed to be in the vicinity of Rs 1,500 crore for the India business unit. The company eventually dialled up its capex for FY21 closing the year with a spend of with Rs 1800 crore spending.
Speaking to Moneycontrol P B Balaji CFO, Tata Motors said, “Last year we spent about Rs 1800 crore at the standalone level. We did see demand come back and so we did calibration of production capacity particularly of petrol engine. As we look for the current year, we are expecting a capex plan of Rs 3000-3500 crore. But again, we will watch demand closely and we will dial up or dial down depending on. We will be dynamic here and we expect to be in this zone as we move forward.”
Tata Motors was one among handful of outliers in India’s passenger vehicle (PV) industry recording a growth in sales during FY21. The maker of Nexon and Safari recorded a growth of 69 percent in volumes in FY21 to 222,025 units compared to FY20. Tata Motors growth came at a time when the rest of the industry saw a drop of 2 percent.
Due to its sustained focus on retail push the company scaled back to the third position in the PV space behind Maruti Suzuki and Hyundai and closing FY21 with a market share of 8 percent, according to data shared by the Society of Indian Automobile Manufacturers.
Balaji mentioned that the inventory days have come down to 12-13 days in the PV segment though ‘the company would be comfortable being at 22-23 days’. The company started the June quarter with less than 10 days of inventory leading to waiting period on its cars.
The commercial vehicle (CV) segment, which generates 70 percent of the standalone revenues, showed a sharp pickup in demand during the December quarter however the March quarter marked a disappointment.
For FY21 CV volumes of Tata Motors were down 23 percent to 262,773 units as against FY20 sales.
Balaji also announced that the company raised prices across CV and PV products during the current quarter (June, FY22). Tata Motors will review its pricing strategy in the coming period given the continued rise in raw material prices.
“Steel and aluminium have seen pretty sharp increase. We have announced price hikes in CV and PV. This inflation in real and we will have to manage it as we go forward. We will have to calibrate price increase and do it judiciously”, added Balaji.
Tata Motors is undertaking a block closure between March 18 to March 22 to rationalise production.
