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Why is tata motors share price falling? Struggle of tata motors।

             This discussion is about the struggle of tata motors. Why is tata motors struggling? Over last some years company's condition is getting worse to worst. Tata motors is one of the oldest company of india. It was established in 1945. Then company's name was TELCO. And later it was changed to tata motors from telco. This old company is now struggling for survival. All the automoblie companies are facing problems for covid-19. And for this performamce of all automobile companies was bad over last months. In April, this company could not do business. And tata motors couldn't sell any passenger vehicles in april month for lockdown. The reason of the bad condition of tata motors is not only the lockdown or corona virus. Company is performing bad from last some years. They are struggling to make profit from last 2-3 years. For not making profit the financial health of the company becomes bad. 

Why is tata motors share price falling? Struggle of tata motors।

         The sales of tata motors in february,2020 decreased 31% than the sales in february,2019. And the sales in march,2020 decreased 84% comparatively than the sales in march,2019. If the performance of last finacial years(FY 2019-2020) is told then the sales of passenger vehicles decreased 38% than the sales of FY 2018-2019 and the sales of commercial vehicles decreased 34%. If we see the impact of corona virus and lockdown its effect was in the last two weeks of march month. In the fourth quarter(january 2020 to march 2020) of fy 2019-2020 the revenue of tata motors decreased 27% and hardly toched the 62492 crore rupees. And the company did loss of 9863 crore rupees. And in the same quarter (january 2019 to march 2019) of last financial year(2018-2019) the company made profit of 1108 crore rupees. Tata motors declared in q4 result that the performance of first quarter in financial year 2020-2021 would weak for corona pandemic and lockdown. And the company could report about 5000 crore rupees negative free cash flow. 


          Company's market share gradually decreases. In 2007 the market share of tata motors was 16.5%. For gradually declining of market shares it touched 6.85% in 2019. And now the market share of tata motors is about 4.9%. Now the market share of tata motors is comparatively 1/3 of the market share of tata  motors in 2007. You can certainly understand that the market share of tata motors have been rapidly declining. Now Jaguar and Land Rover creates huge problems for tata motors. Tata motors bought jaguar land rover in 2.3 billion dollar from Ford company. It have a story behind the acquiring of jaguar land rover by tata motors from ford. 


           In 1991 ratan tata wanted to sell his automobile business to ford. When some executives came to india they showed interest on tata motors. But when ratan tata and his team met the ford team the executives of ford humiliated ratan tata and his team and told that if he didn't know about the business of  passenger vehicles division then why did he start the business? This behaviour of ford executives was not liked by ratan tata and his team. In 2008 financial crisis when ford was near to bankruptcy then ratan tata helped ford. Ratan tata bought their iconic brand, jaquar land rover by 2.3 billion dollar. After the deal chairman of ford,will Ford told ratan tata that he heled ford very much buying jaguar land rover. After acquire the jaguar land rover its performance was bad for next two years. But then jaquar land rover started to perform better. The number of sale was increasing in china and european countries. But from last 5-6 years(from 2014-2015) jaquar land rover faces problem again. The number of sale in china was declining. From january 2019 to april 2019 jaguar sold total 8,800 models. But on the same time period in its last year (january 2018 to april 2018) jaguar sold its 15,100 vehicles. From january 2019 to april 2019 land rover sold its 20400 cars. But on the same time period in 2018 land rover sold 39800 cars. Thus the volume of sales is decreasing not only in china but also in other countries. 


            The competitor of jaguar and land rover like BMW and Mercedes-Benz was successful to achieve the goal of selling highest numbers of their models. But recent JLR are struggling. For the brexit jlr(jaguar and land rover) is struggling in britain. Now jlr focuses on cross cuttings. They fired about 1100 employees from the company and revised their investment and working capitala. Company also launched inventory correction programme. Now see the challenges near to tata motors.


               it is not that company doesn't launch any new product. Company continuously launches cars. Among last some years tata motors launched hexa, nexon, yaho etc cars and its different versions. But any of tgem couldn't perform good. The condition of tata motors is bad and it may be bad for next two years. Company used multiple strategies and many efforts. But nothing doesn't make the performance of the company better. Recently tata motors did double its dealerships. And football star,lionel messi was made its brand ambassador. In stead of reducing problems all the things increase its problems. The deal of jlr does not become good for the tata motors. 


            Now jaguar and land rover plays the role of two edge sword for the tata motors. It means if jlr performs good then the 80% profit of jlr comes to tata motors from it. And if it performs bad then the most of the loss happens for jlr. So many things of tata motors are depended on jlr. Company says that it will launch new exciting products. We see that the recent products of tata motors couldn't perform good. So if the future products will special and interesting then it can perform good. Otherwise the survival of tata motors becomes dangerous day by day. 


             In april 2010 Carl fauster was made md and ceo of tata motors. He tried to change tata motors in profit making company and he became quite successful. But in september 2011 he resigned from tata motors. In august 2012 slim was made managing director of tata motors. He also tried to turnover the company. But between the growth journey of tata motors slim was dead on 26 january in 2014. After this tata motors performed good for next 1-1.5 years. But then the company's performance again started to decline. The compounded rate of sales of tata motors in last 10 years increases 15.59% in every year. But the company can't convert the sales into profit. And to make profit company is struggling very much. In 2012 company made 13,516 crore rupees profit. And the profit remained about same for next some years. And then gradually it decreases. In 2018 the profit of the company was 8,989 crore rupees. And its next year in fy 2019 company faced huge losses. In fy 2019 tata motors did loss of 28,826 crore rupees. The last quarter in 2020 company made about 10,000 crore rupees loss. 


             And the another main problem of tata motors is debt. Recently tata motors have 1,00,000 crore rupees debt. So there is always a pressure upon the company to make profit. But instead of making profit company makes loss. And beside this there is also a huge burden of debt on it. Now the situation of the company is very difficult. If you observe the competitor of tata motors,maruti suzuki then you see that the sale of maruti suzuki is about same to tata motors. The compounded rate of maruti suzuki sale is 15.34% yearly. But maruti suzuki converts its sales to profit. It shows compound rate of profit growth about 18.64%. And for this the share price of maruti suzuki also increases. The share price of maruti suzuki reduced  but in long term it makes profit. 

            

            Another concern of tata motors is profit margin. Profit margin means how much any company converts its revenue to profit? In 2019 tata motors was in loss. So you aren't seen its profit margin. But in 2018 tata motors made 8989 crore rupees profit. So the profit margin of tata motors in 2018

=( profit/revenue )*100

= (8989/291550)*100

= 3%

So the profit margin of tata motors in fy 2017-18 was 3%. It means if the company generates 100 rupees revenue then they make 3 rupees profit of it. 3% profit margin ratio is considered very less. In financial year 2016-17 the profit margin of the company was 2.7%. So the profit margin of tata motors was between 2-4%. On the other hand the profit margin of its competitor,maruti suzuki was averagely 10%. So these challenges are near to tata motors. Debt is increasing,loss is increasing,profit margin is decrasing. So if the company want to survive they have to take some important decisions mainly decisions related to jaguar and land rover. Now it is the interesting matter that what decisions will tata motors take to turnover the company?

 

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