The year 2020 has been termed one of the worst years for passenger vehicle manufacturers in India in the last few decades. Multiple lockdowns associated with the Covid-19 pandemic and slowdown in the economy forced many car manufacturers in India to temporarily halt production lines. The situation was so bad in April 2020 that many automakers reported zero monthly domestic sales for the first time in the history of Indian automotive industry.
Performance of top auto stocks in India in FY21:
Tata Motors, a part of USD113 billion salt-to-software conglomerate Tata Group, is a leading global automobile manufacturing company and India\’s largest OEMs offering an extensive range of integrated, smart and e-mobility solutions. The company’s diverse portfolio includes an extensive range of cars, sports utility vehicles, trucks, buses and defense vehicles.
Performance of Tata Motors Stock in FY21
In FY21, Tata Motors gained 318%, while Nifty gained 71%. During the same period the NIFTY Auto index gained 108% while the stock of Tata Motors generated over 3x returns.
How Tata Motors Fared in FY21
Despite the immense challenges in H1FY21, Tata Motors was a star shining bright in the Indian auto industry. In the first half of FY21, Tata Motors was the only automobile manufacturer in India to report a growth of 2.63% in sales.
The Tata Motors Group sales (including Jaguar Land Rover) for FY21 stood at 8,37,783 vehicles, down by 12.9% as compared to FY 2019-20. Global sales of all Commercial Vehicles were 2,67,513 vehicles, while sales of Passenger Vehicles were at 5,70,270 vehicles.
Despite a decline of 6.1% in the domestic auto industry volumes in FY21, Tata Motors recorded a growth of 4.4% over FY 2019-20 by selling 4,63,742 vehicles. The Company’s market share (calculated on wholesales) increased to 14.1% in FY 2020-21 from 12.7% in FY 2019-20.
Factors that affected Tata Motors’ performance in FY21
- Covid-19 pandemic associated lockdowns
- Temporary shutdown of dealerships and halt of production lines
- Supply chain disruptions
- Slowdown in the economy
Factors that boosted Tata Motors’ performance in FY21
- Strong focus on safety
- New launches and facelifted models of existing cars
- Strong EV portfolio
- Value for money product offerings with multiple feature-rich variants
The road ahead for Tata Motors
Tata Motors has managed a significant turnaround in the last few years, on account of factors like high safety ratings, robust product portfolio in segments with high volume, branding strategy based on products and better customer experience.
With a strong and affordable EV portfolio and plans to launch 10 new EV products over the next 4 years, the road ahead looks bright for Tata Motors.
A subsidiary of Suzuki Motor Corporation of Japan, Maruti Suzuki India is India\’s largest passenger car company accounting for about 50% market share of the domestic car market. The company offers full range of cars from entry level hatchbacks, sedans, multi-utility vehicles and sports utility vehicles. The company is engaged in the business of manufacturing and sale of motor vehicles and spare parts for automobiles. The other activities of the company include facilitation of pre-owned car sales fleet management and car financing.
Performance of Maruti Suzuki Stock in FY21
In FY21, Maruti Suzuki gained 61%, while Nifty gained 71%. During the same period the NIFTY Auto index gained 108%. Hence, we can imply that the stock of Maruti was an underperformer vis-à-vis both the Nifty and Nifty Auto index despite generating good returns in FY21.
How Maruti Suzuki Fared in FY21
Key highlights of Maruti Suzuki’s performance in FY21
- COVID-19 related disruptions adversely impacted Maruti Suzuki’s performance in FY21
- 7% de-growth in total number of vehicles sold in FY21 at 1,457,861 vehicles as compared to the previous financial year.
- 8% decrease in domestic sales in FY21 at 1,361,722 units and 5.9% decrease in exports at 96,139 units compared to the previous year.
- Maruti Suzuki’s revenue in FY21 decreased to Rs 70,332 crore from Rs 75,610 crore in the previous year.
- Net Profit for the year stood at Rs 4,229 crore, decreasing by 25.1% compared to that in the previous year
- Lower sales volume, increase in commodity prices and adverse foreign exchange movement are some of the factors which affected Maruti Suzuki’s performance in FY21
The road ahead for Maruti Suzuki
Maruti Suzuki has been undisputed market leader in the passenger vehicles segment in India right from its inception in the 80s. This can be attributed to factors like value for money products, low maintenance costs associated with Maruti Suzuki cars, easy availability of spare parts, high fuel efficiency and a widespread service network.
The company is all set to launch its Maruti Suzuki WagonR electric vehicle in the latter half of 2021. Besides this, Maruti Suzuki is gearing up to launch several new models such as Maruti Suzuki Jimny, Maruti Suzuki Grand Vitara, and several mid-sized MUVs in the coming months.
With a strong product portfolio of petrol, diesel, CNG and soon-to-be launched electric cars, the road ahead looks bright for Maruti Suzuki. Burgeoning domestic discretionary consumption, drop in Covid cases and improvement in consumer sentiments with recovery in economic activities are some of the key factors which will accelerate Maruti Suzuki’s growth in the coming months.
Mahindra & Mahindra
A flagship company of the Mahindra Group, Mahindra & Mahindra (M&M) is one of the largest vehicle manufacturers in terms of production in India and the largest manufacturer of tractors in the world. Apart from passenger automobiles, light commercial vehicles (LCVs) and tractors, the company also manufacturers three wheelers and electric vehicles. The company also has a presence in the two-wheeler segment through its investment in Jawa brand of motorcycles. Apart from the core business, M&M also holds controlling stake in different companies under the Mahindra brand engaged in business such as IT services, NBFC, logistics, hospitality, real estate, and auto ancillary business.
Performance of M&M Stock in FY21
In FY21, M&M gained 280%, while Nifty gained 71%. During the same period the NIFTY Auto index gained 108%. Hence, we can imply that the stock of M&M was an outperformer in FY21.
How M&M Fared in FY21
In 2020 many auto companies in India faced supply chain disruptions for critical components like semiconductors used in ECUs.
The impact of the Covid-19 pandemic on M&M’s business in FY21 is clear from the fall in its revenue by 1% from Rs 75,382 in FY20 to Rs 74,278 in FY21. For the last financial year, the company reported a consolidated PAT of Rs 3,702 crore as compared with Rs 2,713 crore in 2019-20.
Key highlights of M&M’s performance in FY21
- COVID-19 related disruptions adversely affected M&M’s performance in FY21.
- Mahindra Thar crossed bookings of 55,000 units since launch.
- Mahindra’s XUV300 witnessed strong demand, with 90% growth in bookings in second half of last financial year.
- Revenue from M&M\’s domestic farm machinery business increased by 45% in FY21.
- The company exited from its loss-making aircraft business in Australia and overseas tractor assembly business.
The road ahead for M&M
M&M plans to launch 23 new products over the next five years which includes 9 SUVs and 14 LCVs as well as launch its K2 platform globally in its tractors business. M&M’s revenue from domestic Farm Machinery Equipment business is expected to witness strong double-digit growth over the next few years, on account of strong demand for products like harvesters, rotovators, and transplanters.
M&M has exited from its loss-making subsidiaries and chalked out an aggressive plan to speed up investments in EV as well and create a global brand in this space. With new launches and technology developments, M&M leadership position in the farm equipment business is likely to remain unchallenged
Strong rural demand, increased government spending, aggressive launches in SUV segment and focusing on core UV business and emerging EV businesses are some of the key factors which will accelerate M&M’s growth in the coming months.
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