Tata Motors sees sharp fall in domestic sales

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Tata Motors sees sharp fall in domestic sales

Post  Administrator on Fri Aug 12, 2011 8:22 am

India’s Tata Motors reported disappointing first-quarter results as improving sales of its luxury cars in emerging markets failed to offset a sharp slump in domestic sales.

The Mumbai-based automaker, which owns Jaguar Land Rover, on Thursday posted flat net profits of Rs19.99bn compared with a year earlier and below analysts’ expectations. A Reuters and Bloomberg poll of more than 30 analysts forecast net profits of Rs21.6bn.

Net revenues jumped 24 per cent to Rs335.6bn but higher production costs, such as rising prices for steel, rubber and oil, squeezed the automakers operating margins.

Tata Motor’s overall vehicle sales for the quarter ending in June 2011 rose 3.8 per cent, as strong commercial vehicle sales, which increased 13 per cent in the quarter ending in June, compensated the 10.7 per cent drop in passenger vehicle sales.

A detailed presentation also showed a declining proportion of JLR’s sales in the UK, as the group focuses on expanding its business in India, China, Russia and Brazil. The UK’s proportion of sales fell from 24 per cent of the total to 19 per cent, whereas China accounts for 15 per cent of sales, up from an 8 per cent a year earlier.

Rising fuel prices and the central bank’s repeated interest rate rises to fight high inflation are likely to damp further consumer demand in the coming months, according to analysts in India.
Tata’s poor results reflect a broader bleak scenario for the auto industry in South Asia’s third biggest economy. India’s auto sales fell in July for the first time in nearly three years, highlighting concerns that growth is slowing down more than expected by government officials.

The Society of Indian Automobile Manufacturers said on Wednesday that vehicle sales slumped 16 per cent to 133,747 units compared with 158,767 the year before – a sharper fall than expected by most analysts.

C. Ramakrishnan, Tata Motors chief financial officer, said that rising interest rates in India, which have been increased 11 times in the past 18 months by the central bank, and global economic uncertainty would impact sales in the short-term.

Tata Motors flagship Nano, the world’s cheapest car, has also been struggling to attracts new customers and in July sales plummeted 64 per cent compared with the previous year. The group hopes to boost its presence in India’s rural market. However, it failed to indicate by when it would pushing the small car in non-urban centres.

Separately, JLR voiced its concern about the rioting that has spread to cities across the UK over the past week.

Ralf Speth, JLR’s chief executive, said on Thursday that he was alarmed by “some of the pictures [coming out] of the UK”. He added that he had never expected to see riots sweep the country.
One director of Tata Sons, however, assured that the UK’s difficulties were temporary and that his group strongly favoured the UK for its “open society” and global nature of its business environment.

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