Tata Motors to invest $1 billion in its passenger vehicle business

In order to revamp its domestic operations of passenger vehicle business, Tata Motors is likely to spent $1 billion in next 3 years.

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Why is this important

Tata Motors is facing problem in JLR business as US has levied import duty on luxury cars exported from Europe. Besides, Brexit and crackdown on diesel vehicles in UK have also affected sales of JLR. The domestic business of Tata Motors had also made loss due to decline in market share of commercial and passenger vehicles and impairment cost. However, the company is now taking steps to revamp its businesses by focusing heavily on electric vehicles for its international business, introducing new models in domestic business and gaining lost market share in commercial vehicles business by making improvement in after sales service and pushing inventory by offering huge dealer discounts.

The investment of Tata Motors in its passenger vehicles business is a step to increase  product portfolio, network expansion, enhanced quality operations and superlative customer service. The company has already seen market share increase by more than 1 percentage in FY18 to 6.39 percent in PV business and is now looking to take it to 10 percent.

Impact on stock

The news is positive for the stock of Tata Motors (CMP: Rs 273, M.cap: Rs 86,944, 6.5x FY20E PE).

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