Mumbai: Riding on the SUV wave, Tata Motors has introduced its smallest SUV named the Punch, aimed at buyers of small cars and further challenged market leaders Maruti Suzuki and Hyundai Motor India.Tata Motors expects the Punch to be the top selling model in its portfolio and help the brand move towards a monthly volume of 30,000-35,000 units — assisting it move closer to posting a pretax profit in the passenger vehicle business, said people in the know. The business had posted a loss of Rs 1,558 crore before interest and tax in the fiscal year ended March 31, 2021.
With demand remaining robust and incremental volume from the forthcoming launches of the Tigor EV, Punch and two CNG options are likely to make the PV division to post a profit before tax and become cash positive in fiscal 2023 with an Ebitda margin in a high single digit, Group chief financial officer PB Balaji told ET.
According to several people in the know, with Tata Motors starting the production of the Punch in September, it is likely to manufacture 35,000-37,000 passenger vehicles in October, which will be the highest output by the company in its history.Such is the confidence that the company has given a production plan of 8,000 units for the Punch in October. Its Pune plant is expected to hit the third shift of operation in production for the first time in over a decade.
This also happens at a time when market leader Maruti Suzuki has been compelled to reduce production due to a semiconductor shortage.
Likely to be priced at Rs 5-7 lakh, the Punch will take on the popular models Maruti Suzuki Swift and Hyundai Grand i10, offering a sub-compact SUV as an alternative to the hatchbacks. The company has started accepting bookings for the Punch on Monday across 800 cities, before its official launch on October 20.
In a recent interview with ET, Shailesh Chandra, president of the passenger vehicle division at Tata Motors, had said the Punch was aimed at people who would have a slightly lesser budget but were aspiring to own an SUV.
We are definitely looking at very high volumes. With the Nexon we are doing about 10,000 units a month. Punch, with its strong value proposition, will be bringing in significant incremental volumes for the brandShailesh Chandra, President, PV division, Tata Motors
“We are definitely looking at very high volumes. With the Nexon we are doing about 10,000 units a month. Punch, with its strong value proposition, will be bringing in significant incremental volumes for the brand,” Chandra had said, while declining to share specific numbers.The Punch will be sitting right at the heart of a segment where almost 900,000 cars are sold annually — across entry and premium hatchback and entry sedans.Tata Motors is already operating its facility at more than 70% capacity utilisation and is able to gain on the operational leverage. While Tata Motors also faced chip shortage issues and had to adjust production, it is looking at a record output in October, with an order book running into a couple of months.
With sustained demand for all the models in its portfolio, the company is on track to sell 300,000 passenger vehicles this fiscal year.
Tata Motors sold around 148,000 cars and SUVs in the first half of FY22, which was nearly double of the volume a year earlier, despite being hurt by lockdowns and chip shortage. Thanks to a sharp outperformance with industry, Tata Motors’ passenger vehicle market share rose to around 11% in the September quarter, the highest in eight years and compared with just 4.8% in FY20.
The PV division is on course to break into a profit next fiscal year with a high single-digit operating profit margin for the first time at least in a decade, if the company is able to sustain volumes around 35,000-40,000 units.
Tata Motors PV division posted revenue of Rs 5,300 crore in the first quarter of FY22, with vehicle sales volume of 64,600 units that resulted in an operating profit margin of 4.1%, which was just half a percentage point less than that of Maruti Suzuki. The revenue was Rs 10,774 crore in FY20 and Rs 16,923 crore last fiscal year.
The Nexon SUV has been maintaining a 16-20% market share in the sub-four-meter segment consistently and accounts for nearly 36-40% of the total monthly volume of the company.