Tata Motors zooms to 7-year high on strong growth prospects

Shares of Tata Motors Ltd touched a seven-year high on June 20 as sentiment for the company runs high on its strong growth prospects.

Tata Motors hit a high of Rs 581.90 intraday on the BSE, a level last seen on September 8, 2016. At 1:10pm, the stock was trading at Rs 580, up 2.5 percent from the previous close.

Let’s check out the factors driving the stock to the fast lane.

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Strong production

Brokerage firm Pradbhudas Lilladher pointed out that India’s largest electric vehicle (EV) maker has expanded its manufacturing capacity by nearly three times in the last three years.

The recent purchase of Ford’s Sanand plant has increased the automobile major’s capacity to 1 million units per year. The analysts at the broking firm said a potential savings of Rs 5,000 crore was achieved through prudent capital deployment in acquiring the plant.

Expanding footprint
Tata Motors has become the second largest in India in terms of sales outlets with 1,410 showrooms across the country, up from 862 in FY20. Its service centres increased to 855 from 653 three years ago.

Eyeing profitability

Analysts at Jefferies said that Tata Motors’ British arm Jaguar Land Rover (JLR) has successfully reduced its break-even production levels by 50 percent in the fiscal year 2023. As part of its transition to a new all-electric platform, Jaguar plans to cease vehicle assembly at the Castle Bromwich plant. This strategic move is expected to enhance the company’s utilisation levels, according to analysts.

JLR has streamlined its platforms, reducing them from nine to seven, and it aims to further consolidate them to three platforms once the electric vehicle (EV) strategy is implemented.

The Indian division of the company is benefiting from a positive demand cycle and improvements in its passenger vehicle (PV) franchise. Tata Motors’ strategy, which focuses on SUVs and attractive product styling, shows promise in the Indian PV market.

At the same time, JLR sees a significant turnaround in operational and financial performance as the chip supply issues have started to ease, Jefferies has said.

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