Why Tata Motors stock is falling? 4 key reasons driving the decline

Tata Motors, once a star performer on Dalal Street, has hit a rough patch in recent months. The company’s stock, which soared to an all-time high of INR 1,179 in July 2024, has plunged by 35.44% to INR 787 as of December 16. This marks the steepest fall among the 15 automobile stocks in the Nifty Auto index.

Tata Motors and Nifty Auto Index
Tata Motors carries significant weight in the Nifty Auto index, ranking second with a 15.31% contribution. Mahindra & Mahindra (M&M) leads the index with 24.24%, while Maruti Suzuki and Bajaj Auto hold 13.36% and 9.19%, respectively. Together, these four companies make up 62.1% of the index’s weight.

Despite the sector's challenges, the Nifty Auto index has shown resilience, recovering partially from an 18% decline over the last two months. As of December 16, the index is 15% away from its all-time high. In contrast, Tata Motors' performance lags behind its peers. While M&M is trading just 3-4% below its peak, Maruti Suzuki is down 18%, and Bajaj Auto has dropped 32% in the same period.

What’s causing Tata Motors’ decline?
The challenges for Tata Motors span across multiple business segments, including domestic passenger and commercial vehicles and its premium brand, Jaguar Land Rover (JLR). Here are the four key reasons behind the dip:

1. Struggles in Commercial Vehicles
Tata Motors, which holds a 38.1% market share in the domestic CV market, is facing headwinds. In Q2 FY25, domestic wholesale CV volumes dropped by 19.6% year-on-year due to factors like a slowdown in infrastructure projects, reduced mining activity, and lower fleet utilisation caused by heavy rains. This led to a revenue decline of 13.9% in Q2 and 5.2% in H1 FY25.

2. Slow Passenger Vehicle and EV sales
Tata Motors’ passenger vehicle sales, including electric vehicles (EVs), have also slowed down. The recently launched Curvv EV, which accounts for 20% of EV bookings, faced ramp-up issues. However, the company expects to resolve these problems and launch three to four new variants in the second half of FY25.

3. Pressure from discounts
This festive season saw aggressive discounting across the auto industry, and Tata Motors was no exception. The company offered discounts of up to INR 2 lakh on internal combustion engine (ICE) vehicles. Even EVs like the Nexon saw price cuts of up to IN 3 lakh, especially after the launch of the Curvv electric SUV coupe.

4. JLR's EBITDA Margins
Jaguar Land Rover (JLR) has been facing challenges with its EBITDA (earnings before interest, taxes, depreciation, and amortisation) margins, which have been under strain for the past two quarters. The company has also fallen short of its initial guidance for the year in key areas, including volume growth, profitability, and free cash flow generation.