🚀 Tata Motors: Steering Towards Growth

40%+ returns in 5 days! After years of underperforming, Tata Motors is now shooting through the roof. Here's why.

Tata Motors shareholders had been frustrated with the stock's underperformance over the last few years. 

With Jaguar not performing and the supply chain being disrupted by Covid, nothing seemed to be going well. But, as they say, patience pays.

A 42% rise in the past five days is bonkers for a Nifty50 company! 

But, how did Tata's share go from a pandemic low of Rs. 63.60 (as of 24 March, 2020) to a 52-week high of Rs. 519.95 (as of October 13, 2021).

Well, Tata has been laying the groundwork for this growth for the past few years. 

Growth in Market Share

In the 1990s, Tata Motors was one of India's leading carmakers and managed to change the face of the automobile market. When most other companies were manufacturing cars that featured the same boring designs, Tata introduced the Safari, "India's first true SUV." 

From 2004-2007, when the company was at its peak, it enjoyed a market share of around 16%-17%. But as the automobile market got more competitive, Tata began struggling to appeal to consumers.

Its acquisition of the struggling UK-based company Jaguar Land Rover also contributed to its fall. Though Tata managed to make the company profitable, the 2016 Brexit deal put the brakes on this growth. How? 

At the time, Tata sourced 40% of its manufacturing components from EU countries. After Britain decided to leave the EU, new taxes and tariffs increased the cost of these components. 

The EU also increased taxes on diesel-based vehicles after 2015, forcing Tata to switch to eco-friendly vehicles. Though this would be great for the business in the long run, it increased costs for the company, especially as it had to offload its diesel vehicles at discounted prices. 

But since 2016, Tata has been working on improving the quality and the design of its cars. The vehicles it has launched in the last five years: the Nexon, the Harrier, the Altroz, and the Tiago, have better engine performance and safety standards. They also look more aesthetic than their previous models, capturing the Indian customer’s imagination.

It is now the only company among the top five car manufacturers that saw sales grow significantly in the September 2021 quarter. This has helped it grow its market share from 4.8% in 2016, to 13.84% in 2021, making it India's third-largest car manufacturer.

EV Push

Tata's expansion into the electric vehicle sector is also a contributing factor to the surge in stock price. The company entered the EV space with Tigor EV in 2019 and in just two years, it holds 70% of the market share!

And Tata has an obvious edge over other carmakers in this segment. Its subsidiaries, Tata Power and Tata Chemicals, provide it with knowledge about electrification and find equipment to make EV batteries.

Its EV subsidiary, Tata EVCo, has also secured funding of $1 billion from TPG Rise Climate, a climate-related investment. Tata Motors itself will also invest $2 billion in its EV business over the next five years. Looks like Tata is gearing up for growth not only in India, but also to compete with the likes of Tesla!

Investors are realising the tremendous growth potential of the EV industry, especially as more countries are investing in the sector to combat climate change. 

Will Tata be able to leverage these advantages to further grow in the EV space? Can it become the next Tesla?

What do you think? 

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