Tata Motors Ltd will also raise prices of its commercial vehicles (CVs) by up to 3% from 1 January. It said the price hike is to offset the residual impact of the past input costs. It is worth noting here that while input costs have been higher, the pressure has been easing in the past few months.
Amid this, price hikes by automakers are likely to support profit margins. Apart from Tata Motors, Maruti Suzuki India Ltd and Mahindra and Mahindra Ltd too, plan to implement price hikes from January citing inflationary forces and fluctuations in commodity prices. Tata Motors had also taken a price hike in CVs from 1 October in anticipation of commodity headwinds, especially from steel price.
As such, the company’s CV volume growth is expected to moderate in FY24 vis-à-vis FY23. In the quarter-ending September (Q2FY24), Tata Motors’ total domestic CV volumes saw 6% year-on-year growth. Further, according to the Q2 presentation, market share based on Vahan registration data shows the company’s CV domestic market share rose sequentially to 39.7% in Q2 from 39.1% in Q1.
This expansion came on the back of new product launches in tandem with improved availability of vehicles after the BS6 phase II transition. Moreover, there is thrust on profitability. In Q2, CV business saw year-on-year Ebitda margin expansion of 540 basis points to 10.4% on the back of a richer product mix and better realizations.
Ebitda is earnings before interest, tax, depreciation, and amortization. One basis point is 0.01%. Going ahead, Tata Motors intends to continue to clock a double-digit Ebitda margin in the CV segment.
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