It is my privilege to write to you and present the Annual Report for 2018-19.
The global automotive industry is witnessing disruptive innovations. The technological changes are leading to new products and business models including shared mobility, autonomous and connected vehicles. Concerns about sustainability are leading the governments across the world to push for reduction in the carbon footprint, encouraging the adoption of electric vehicles. These changes coupled with geo-political trade situation, uncertainty around Brexit and slow-down in China have led to a period of uncertainty for the global auto industry.
In the Indian context, the automotive industry is expected to emerge as the world''s third largest passenger vehicle market by 2021, driven by the underlying economic growth, increasing consumption demand and mass urbanization. However, in the short to medium term, the sector faces some challenges due to the ongoing credit crunch, low consumer spending and the transition from BS IV to BS VI emission norms by April 1, 2020. The growth in the commercial vehicle market is likely to pick-up driven by increased infrastructure spending, growth of new-age industries like E-Commerce and further progress in the hub and spoke model of distribution.
In this backdrop, I would like to share with you the performance, status and future direction of your company.
Tata Motors Limited (India Market)
At Tata Motors Limited - India, we had announced a Turnaround” programme in July 2017. Since then, your company has undertaken a series of comprehensive steps to address different aspects of the business. I am happy to share with you that the result of these initiatives has been visible in your company''s strong operational and financial performance.
In the commercial vehicles segment, which is the back-bone of the domestic business, the company has maintained its leadership position in the industry with a 45.1% market share in FY 2018-19. The business delivered a 17.2% volume growth compared to the previous year. This is a strong performance in the background of a weaker second half of the year driven by increased axle load norms, liquidity crunch and lower demand.
In the passenger vehicles segment, your company delivered a credible performance by growing its volumes at 13.9% compared to the industry growth rate of 2.8% in FY 2018-19 and achieved the highest unit sales and market share over the past five years. Your company launched a portfolio of successful products including Nexon, which is the only car in India with a 5-star” safety rating from GNCAP and the second most selling SUV in India. The Tata Harrier was launched in January 2019 to an overwhelmingly positive customer reaction.
While your company continues to make significant progress, by no means the work is done. In the CV segment, your company needs to grow and secure the sustainable cash flow from the business and ensure smooth transition to BS VI emission norms. In the PV segment, your company needs to enhance its sales and service offering which is a key to growth in volumes and execute its plan to achieve profitability at PBT level.
On Electric Vehicles, your company''s strong belief is that this is a necessary initiative for India. Your company is committed to take the lead in this transition and work with other companies in the Tata ecosystem to help create a viable environment to drive adoption of electric vehicles. However, this transition has to be well planned. The government and industry need to work together to ensure that ecosystem is developed, incentives are provided to stimulate demand and sustainability goals are achieved by implementing emission norms across the value chain.
Jaguar Land Rover
JLR is making significant investments to develop next generation products. Over the past year, the company has continued to develop award-winning products that combine outstanding performance, quality and technology. The all electric Jaguar I-Pace has been awarded the 2019 World Car of the Year, 2019 World Car Design of the Year and the 2019 World Green Car, being the first car ever to win three World Car titles, along with being awarded the Car of the Year at the European Car of the Year Awards 2019. This is a gratifying testament for the superior next generation car portfolio of JLR.
From an operational performance perspective, the last twelve months have been challenging for JLR. These have resulted in the business reporting a revenue decline this year and an operating loss. Our sales from China declined by 34.1% this year compared to the previous year. The company faced headwinds from external factors including slowdown of sales in China and Europe along with internal factors of high fixed cost structures, dealer network profitability and high investment leading to cash outflows.
JLR is taking steps to cut costs while taking a calibrated approach towards future investment in the product portfolio. The company is actively looking at partnerships and prioritizing its investments while ensuring that it is not compromising its future. These are critical interventions and JLR is committed to deliver cost and cash improvements.
The next few years are going to be decisive for our Company.
We have to focus on strong operational excellence to deliver positive cash flows while making the right investments to be prepared for the future. We need to transform ourselves to be relevant in the world of future mobility. This will require us to form partnerships, develop mobility solutions and optimize our investment in the process.
I am aware that it has not been an easy journey and I would like to thank our employees, management team, dealers, customers, suppliers and all other stakeholders for their hard work and commitment at this important time of the company''s journey.
I would also like to thank you for your continued trust, confidence and support as we turn this business around and deliver the results that we all look forward to.
Mumbai, May 20,2019