Tata Motors sees ICE margins under strain, bets on cost cuts and festive demand for recovery

Tata Motors' stock price is down nearly 15 percent since the beginning of the year.

Tata Motors expects its ICE vehicle or internal combustion engine margins to remain under pressure in the near term despite cost-cutting measures, as commodity inflation, a weak model mix and heavy industry discounting weigh on profitability.

Management said ICE margins have been under stress for some time, with an additional blow from commodity inflation in the June quarter, driven mainly by higher steel prices, safeguard duty of 12 percent and forex risks. While a residual impact will spill into Q2, the company expects some improvement from current levels.

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However, margins are likely to stay subdued for the rest of the year as Tata Motors works to exit the calendar year with minimal modular stock. The company is banking on deeper cost-reduction efforts, a better model mix from curated variants of the Harrier and Safari, and possible price hikes in the second half — aided by festive demand — to lift margins by 3-4 percentage points over the next few quarters.

In contrast, the EV business has been showing a steady improvement in profitability. Tata Motors said EV margins have been rising year-on-year even without battery localisation incentives, helped by significant cost cuts. The segment reached EBITDA breakeven with incentives in Q1, and management expects further margin gains as the mix improves with the Harrier.EV and other models.

Tata Motors on August 8 reported a net profit of Rs 3,924 crore for the April-June quarter of the financial year 2026. This marks a 30 percent on-year drop from the Rs 5,643 crore net profit from continuing operations reported in the same period last year. The drop in net profit was in line with the Moneycontrol poll of six brokerage firms.

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The firm's revenue from operations meanwhile dropped 2.5 percent on-year to Rs 1.04 lakh crore in Q1 FY26, from Rs 1.07 lakh crore in Q1 FY25. Revenue however beat estimate, as brokerages polled by Moneycontrol had expected the firm's revenue to drop 8.7 percent.

Shares of the company closed at Rs 634, lower by 2 percent from the last close on the NSE. Tata Motors' stock price is down nearly 15 percent since the beginning of the year.

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