Tata Motors Shares Tank 5% on UBS 'Sell' Rating Amid Weak Growth Outlook, Discount Strategy

Shares of Tata Motors tanked over 5 per cent on Wednesday to become the loser on the Nifty 50 index after the global brokerage firm UBS issued a “Sell” recommendation on Tata Motors with a price target of Rs 825 per share, anticipating a potential downside of 20 per cent from Tuesday’s closing levels.

Currently, the stock is trading nearly 12 per cent down from its 52-week high of Rs 1,179, which it had touched on July 30, 2024. The stock has gained over 70 per cent from the 52-week low of Rs 608.45 on October 4, 2024.

On a year-to-date (YTD) basis, the stock has jumped 24 per cent to Rs 985.10.

At 10:20 AM on Wednesday, Tata Motors shares were trading 5.21 per cent or 53.95 points down at Rs 981.85 on the National Stock Exchange (NSE).

In its report, UBS raised the question of whether investors should be concerned about the spike in Tata Motors British subsidiary Jaguar Land Rover (JLR) discounts.

JLR's premium models, including the Defender, Range Rover and Range Rover Sport, have contributed to higher average selling prices (ASPs). However, the strong demand for these models is starting to slow down.

The order book has declined to below pre-pandemic levels, and discounts on Range Rovers are expected to increase soon.

In addition, UBS expects further downside risks from margin slippage at Jaguar Land Rover and within Tata’s Indian passenger vehicle segment.

In the June quarter of FY25, JLR reported a 5.4 per cent increase in revenue at 7.3 billion euros.

The company’s operating margins or EBIT (earnings before interest and taxes grew 30 basis points to 8.9 per cent for the quarter on the back of favourable volume, mix and material cost improvements.

In the JLR segment, the company is expecting to witness constrained production in the second and third quarters due to annual plant shutdown and floods at a key aluminium supplier.

On Tuesday, Tata Motors announced significant discounts of up to Rs 2 lakh on select SUV models as part of its festive season offerings, aiming to boost demand in the sluggish passenger vehicle (PV) market. The company is currently offering a limited-time special promotion that brings the prices of its Nexon EV, PunchEv and Tiago EV models in line with internal combustion engine (ICE) vehicles and this offer is available till October 31, 2024

Tata Motors stated that this move will aid in "mainstreaming" electric vehicles across the country.

Vivek Srivatsa, chief commercial officer of Tata Passenger Electric Mobility, said the company's goal is to break down barriers for EV buyers. "At TATA.ev, our mission is to make EVs mainstream by reducing the cost of ownership. With these special prices, we are bridging the gap between EVs and their petrol or diesel-powered counterparts," he said.

Recently, the company announced discounts of up to Rs 2.05 lakh on its ICE vehicles as part of the same campaign.

As per a report by the Federation of Automobile Dealers Associations (FADA), this move aims to counter the 3.46 per cent month-on-month (m-o-m) and 4.53 per cent year-on-year decline in passenger vehicle sales in August.