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Tata Motors expects CV sales to grow 25% this fiscal

Tata Motors is hopeful of closing this financial year with a 25% growth in commercial vehicle (CV) sales and continuing the run next year as well on replacement demand to meet new emission norms and a pick-up in the economy.

The company expects to close the hybrid bus order from BMC "any day now", having already signed an agreement with the authorities.

"Truck sales have overall reached the 2011-12 peak, and we have been leading the market. We hope to close this fiscal year with around 25% spike in overall sales. The first two months of the current quarter have been very good, and March should be better," Tata Motors Executive Director for the commercial vehicle business unit Ravi Pisharody told PTI.

"We hope to continue the sales growth next fiscal year as well, which in percentage terms may be lower than this fiscal, considering the high base. Still, we expect to clock 10-15% jump in sales as BS-IV norms will kick in from April 2017. I expect the second half of the next fiscal year to be better than H1," Pisharody said.

In April-May of 2015-16, Tata Motors stood out on the sales front. While domestic CV sales rose 20% to 30,670 units and exports 42% to 5,636 units in January, the same rose 22% to 14,872 units and 31% to 5,142 units, respectively, in February.

On the order for 25 hybrid buses from BMC, he said, "We have already signed an agreement with BMC and expect the final order for 25 hybrid buses any day now. This is the single-largest order for hybrid in the country till date."

Each bus, which will be diesel-cum-electric hybrid, is expected to cost more than Rs 2 crore, including the annual maintenance charges, sources said.

Asked if he expects the domestic unit to report profit in the fourth quarter, he declined to comment, saying the company does not offer guidance on profitability.

After incurring heavy losses for many years, the company put up a better show in the December quarter when the profit drop at its British unit JLR was made up after a huge recovery of the domestic unit narrowed its net loss to about Rs 201 crore, from Rs 2,122.72 crore in the same period last fiscal.

While announcing the third quarter numbers, group financial officer C Ramakrishnan had attributed the near turnaround of the Tata Motors' domestic business to a significant improvement in operating margin at 5.7%, a gain of 860 bps year-on-year, even after adjusting for the Singur issue and other one-offs in the third quarter of 2014-15.

According to him, the improvement was driven by the turnaround in the medium and heavy commercial vehicle segment, which grew 14.8 %. The domestic business maintained a positive EBITDA margin trend in all the three quarters of the current year, compared with a negative one in the previous fiscal.

Asked if the excise duty hike and the resultant rise in prices, coupled with the new cess on cars, will weigh on the sales pick-up, Pisharody said he does not think so.

"From the passenger car perspective, the hike in excise duty is not going to impact us as we are not in that higher category (Rs 10 lakh models). So, our main business of commercial vehicles is insulated from the hike. Overall, I don't see any impact on sales, as customers anyway will have to upgrade to BS-IV models from next year," he explained.

Whether the sales growth is being driven by replacement market or new buyers, he said it is almost equal now. "Till a few months ago, the replacement demand was a high 70-80%. But now, it is down to 45-50%, which is the ideal demand," Pisharody added.

Following the Budget, Tata Motors had increased prices of its passenger vehicles by up to Rs 35,000 with immediate effect to offset the impact of infrastructure cess.

Tata Motors sells a wide array of passenger vehicles, ranging from the entry-level Nano to premium crossover Aria, priced between Rs 2.04 lakh and Rs Rs 15.79 lakh.

The Union Budget 2016 imposed a 2.5% cess on diesel vehicles of length not exceeding 4 meters and engine capacity not exceeding 1,500 cc while higher engine capacity and SUVs and bigger sedans will attract a cess of 4%.