Tata Motors' retail offtake plays catchup with booking demand which company sees only accelerating ahead

Chandra said that Tata Motors’ channel inventory continues to be at very low levels, which isn’t helpful considering the unfulfilled demand that leads to, but it is a sign of intrinsic demand. Additionally, Tata Motors has possibly the highest number of days in terms of bookings available in the industry, which Chandra also reads as a sign of demand which will not only sustain but also grow.

“While we have more than doubled volumes compared to where we were last year, our profits have swung significantly too. Our EBITDA margin was at positive 3.8 percent in Q3 , up from about negative 9.4 percent. The significant swing in profitability shows the focus is not only to grow and scale, but scale also helps profitability. We have a mix of products which deliver both volumes and profitability”, Chanda told CNBC-TV18.

The global shortage of semiconductors for the automotive industry has constrained production lines across OEMs. Tata Motors says the issue will persist for the next 4-5 months, but the OEM is trying to manage the supply chain avoiding the loss in supply. Chandra told CNBC-TV18 that the company had to make alternate arrangements to mitigate this risk, including going to tier-two level suppliers directly to buy semi-conductors, and giving advanced schedules to suppliers for 12 months ahead, instead of the usual practice of 6 months.

However, the company has pre-planned production for the Safari and says it hopes it will be able to service the demand for the new vehicle, although there will certainly be a waiting period for buyers after they book the product. The extent of the waiting period can be gauged after two weeks of assessing booking levels, Chandra said.

Although Tata Motors, like every major OEM has taken a price hike across its portfolio in January, another hike in prices cannot be ruled out in the next fiscal years, as commodity prices continue to be inflated.

Chandra cited a 5-7 percent impact on the cost side, which the company will offset by taking price hikes and also by undertaking a sharp cost reduction program. As the automaker anticipates steel prices to remain high in Q4, along with the constrained supply of semi-conductors which will bring a cost impact, Chandra says there will be a residual recovery that the company will still have to do despite January’s round of price revisions.

Since demand is not a very certain path, Chandra says, the timing and the quantum of the price hikes will be decided in a “balanced manner”, given the precarious demand situation.