Analyst Call Tracker: Why Tata Motors' Punch's record 2024 not enough for brokerages?

Amid recent market correction, Tata Motors stock is down about 30 percent from its peak.

The year 2024 was nothing short of a rollercoaster for Tata Motors, marked by sharp corrections from the highs and fears of a demand slowdown. But just when it seemed like a year of challenges, the company delivered a master stroke. In a moment no one saw coming, Tata Motors dethroned Maruti Suzuki to become India’s top carmaker for the first time in 40 years.

The star of this remarkable comeback? Tata Punch. Launched in 2021, this compact SUV was a revelation for the company. With over 2.02 lakh units sold in 2024, it catapulted Tata Motors to the top spot, knocking Maruti Suzuki off its perch.

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The Punch redefined the sub-4 metre SUV category, blending SUV ruggedness with the convenience of a hatchback. Its upright stance, 190 mm ground clearance, and commanding driver position, all within a compact 3.8-metre footprint, created a whole new sub-segment, luring buyers.

Adding to the drama, an Autocar Pro report revealed a seismic shift in India’s car-buying trends. SUVs dominated the leader board, claiming three of the top five spots. The Maruti Ertiga, once the undisputed leader in 2023, found itself relegated to fourth place in 2024.

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Despite this feat, quite a few analysts are not convinced about the prospects of the Nexon maker. To be sure, 9 analysts have a 'hold' call on the counter, 5 say 'sell' and 22 suggest 'buy' the Tata Motors stock, Bloomberg data showed.

India’s four-wheeler industry faced a bumpy ride in 2024, navigating a high-base effect, an election-induced slowdown, and relentless summer heat that cast a shadow over auto stocks. Amidst this turbulence, Tata Motors stood firm as a key player but finds its journey forward riddled with challenges.

Tata Motors commands a robust 58 percent market share in electric vehicles as of October 2024, thanks to a diverse portfolio that includes five EV models: Nexon, Punch, Tiago, Tigor, and the newly launched Tata Curvv. However, this dominance is waning. A year ago, the automaker held a commanding 74 percent share but intensified competition from rivals like Mahindra & Mahindra (M&M) and Maruti Suzuki has started to eat into its lead.

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Adding to the pressure are concerns flagged by UBS, which identified margin slippage at Tata Motors’ luxury arm, Jaguar Land Rover (JLR), and in its domestic passenger vehicle segment as a significant downside risk. The extended strong run of JLR’s premium models—Defender, Range Rover, and Range Rover Sport—has begun to taper off, with the order book for these models now returning to pre-pandemic levels. UBS also predicts rising discounts on the Range Rover, signalling cooling demand in this once-thriving segment.

Tata Motors’ EV sales are also hurt despite its first-mover advantage. Analysts warn that rivals M&M and Maruti Suzuki are emerging as formidable contenders. M&M recently launched two EVs, the XUV 9e and BE 6e, directly challenging Tata's flagship Nexon and Curvv.

Meanwhile, Maruti Suzuki is gearing up for its much-anticipated EV debut with the e-Vitara, an electric SUV set to roll off its Gujarat plant assembly line in 2025. The e-Vitara will serve both domestic and global markets, with nearly 50 percent of its production slated for export, potentially altering the competitive landscape.

However, there's a glimmer of hope. In its Q3 sales update, JLR said that its wholesale volumes increased by 3 percent year-on-year (YoY) to 1,04,427 units, reflecting a recovery from prior supply disruptions, while retail sales declined 3 percent to 1,06,334 units. Wholesales saw a robust 20 percent sequential increase from Q2 FY25, driven by notable gains in JLR’s flagship models.

Range Rover volumes rose 22 percent, Range Rover Sport climbed 17 percent, and Defender grew 13 percent year-on-year. These high-margin models accounted for 70 percent of total wholesale volumes, reflecting a stronger overall mix.

Domestically, the company reported mixed performance in December 2024 across its commercial and passenger vehicle segments. In the commercial vehicles category, total sales stood at 33,875 units, marking a 1 percent decline compared to December 2023. Domestic sales of medium and heavy intermediate commercial vehicles (MH&ICV) reached 15,968 units, reflecting a 5.24 percent drop year-on-year.

In contrast, the passenger vehicles segment delivered marginal growth. Total sales rose to 44,289 units, a 1 percent increase from the same period last year. Domestic passenger vehicle sales were 44,230 units, registering a 2 percent uptick year-on-year, highlighting steady demand in the segment. The figures show case resilience in passenger vehicles despite softness in the commercial vehicle market.

On January 15, Tata Motors shares ended 1 percent lower at Rs 763. Amid recent market correction, Tata Motors stock is down about 30 percent from its peak.

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