Management Discussion and Analysis

Commercial Vehicles in India

The following table sets forth the Company’s commercial vehicle sales, industry sales and relative market share in commercial vehicle sales in India.

Industry sales of commercial vehicles increased by 21.7% to 887,316 units in Fiscal 2018 from 729,360 units in Fiscal 2017. Industry sales in the medium and heavy commercial vehicle segment has grown by 17.3% at 247,659 units in Fiscal 2018, as compared to 211,198 in Fiscal 2017. The M&HCV industry has shown signs of recovery since July 2017. The implementation of GST, restrictions on overloading and infrastructure growth supported by the Government has boosted the demand. Industry sales of ILCV reported an increase of 27.9% to 103,131 units in Fiscal 2018, from 80,625 units in Fiscal 2017. Industry sales of SCV & Pickups reported an increase of 29.9% to 421,084 units in Fiscal 2018, from 324,090 units in Fiscal 2017. The ILCV & SCV industry growth is mainly due to high investments in e-commerce segments which is driving demand for last mile transportation requirements, growth in replacement demand, improved financing and recovery in rural demand. Industry sales of CV Passenger reported a marginal increase of 1.8% to 115,442 units in Fiscal 2018, from 113,447 units in Fiscal 2017 due to muted demand from STUs.

The sales of the Company’s commercial vehicles in India outperformed the industry with a growth rate of 23.3% to 399,821 units in Fiscal 2018 from 324,175 units in Fiscal 2017. The Company’s sales in the M&HCV category increased by 15.5% to 134,455 units in Fiscal 2018, as compared to sales of 116,403 units in Fiscal 2017. The Company’s sales in the ILCV segment increased by 35.6% to 46,343 units in Fiscal 2018, from 34,166 units in Fiscal 2017. The sales in SCV & Pickups segment increased by 37.3% to 166,746 units in Fiscal 2018 from 121,411 units in Fiscal 2017. However, the CV Passenger segment remained flat with a growth of 0.2% to 52,277 units in Fiscal 2018 from 52,195 units in Fiscal 2017. There has been positive customer response to the superior range of BS4 vehicles complemented by the success of the Company’s innovative SCR technology led to this growth. The new products introduced like the Ultra range trucks, ACE XL range have seen very strong response.

Tata and other brand vehicles - International Markets

The Company’s exports (on standalone basis) de-grew by 18.4% to 52,404 units in Fiscal 2018 as compared to 64,221 units in Fiscal 2017. The reduction was on account of contraction in TIV (Total Industry Volume) in few key markets. The increase of exports to Nepal provided an opportunity for the Company. The launch of new models in the Middle East and Africa region, along with the opening of new markets in these regions, contributed to an increase in international sales volumes. The Company’s top five (quantity terms) export destinations for vehicles manufactured in India - Bangladesh, Nepal, Sri Lanka, South Africa and Indonesia accounted for approximately 81% of the exports of commercial vehicles and passenger vehicles.

In Fiscal 2018, Tata Daewoo Commercial Vehicle Co. Ltd or TDCV’s overall vehicles sales were 8,870 units compared to 10,317 units in fiscal 2017, a drop of 14.0%. The domestic sales in South Korea at 6,859 units in Fiscal 2018, reduced by 22.0% as compared to 8,795 units of Fiscal 2017, primarily due to lower industry volumes and aggressive discounting and marketing strategies of importers considering their higher ordering level. The combined market share was 26.5% as compared to 29.6% in Fiscal 2017. The export market scenario continued to remain challenging in Fiscal 2018 with factors like local currency depreciation against the US Dollar,continuing statutory regulations to reduce imports, the slowdown in Chinese economy impacting commodity exporting countries and increased dealer inventory. However, TDCV could increase its export sales to 2,011 units, 32.1% higher compared to 1,522 units in Fiscal 2017 primarily due to better sales in key markets such as Algeria & Vietnam through new distributors and higher focus on KD shipments to counter CBU import regulations.

Tata and other brand vehicles — Sales, Distribution and Support

The Company’s sales and distribution network in India as at March 2018 comprised approximately 4,931 contact points for sales and service for its passenger and commercial vehicle business. The Company’s subsidiary, TML Distribution Company Limited, or TDCL, acts as a dedicated distribution and logistics management Company to support the sales and distribution operations of its vehicles in India and has set up stocking points at some of Company’s plants and at different places throughout India. The Company believes this has improved the efficiency of its selling and distribution operations and processes. The Company uses a network of service centers on highways and a toll-free customer assistance center to provide 24-hour roadside assistance, including replacement of parts, to vehicle owners.

TDCL helps the Company improve its planning, inventory management, transport management and timing of delivery. The Company has customer relations management system, or CRM, at all of its dealerships and offices across the country, which supports users both at its Company and among its distributors in India and abroad. The Company believes that the reach of its sales, service and maintenance network provides it with a significant advantage over its competitors.

The Company markets its commercial and passenger vehicles in several countries in Africa, the Middle East, South East Asia, South Asia, Australia, Latin America, Russia and the Commonwealth of Independent States countries. The Company has a network of distributors in all such countries, where it exports its vehicles. Such distributors have created a network of dealers and branch offices and facilities for sales and after-sales servicing of the Company’s products in their respective markets. The Company has also stationed overseas resident sales and service representatives in various countries to oversee its operations in the respective territories.

TML has a 100% subsidiary TMF Holdings Ltd which in turn has two operating Companies Tata Motors Finance Ltd and Tata Motors Finance Solutions Ltd. Through Tata Motors Finance Ltd, it provides financing services to purchasers of its vehicles through independent dealers, who act as the Company’s agents for financing transactions, and through the Company’s branch network. Tata Motors Finance Solutions Ltd provides funding in the Used Vehicle Finance space and is also in the Business of extending loans to TML Dealers and Vendors. Revenue from the Company’s vehicle financing operations (on consolidated basis as per Ind AS) increased by 8.4% to Rs.2,632.18 crores in Fiscal 2018 as compared to Rs.2,429.23 crores in Fiscal 2017, which was mainly driven by growth in the commercial vehicle segment.

TMFL disbursed Rs.15,406 crores and Rs.9,298 crores in vehicle financing during Fiscal 2018 and 2017, respectively. During Fiscal 2018 and 2017, approximately 25% and 22%, respectively, of the Company’s vehicle unit sales in India were made by the dealersthrough financing arrangements where the Company’s captive vehicle financing divisions provided the support. As at March 31, 2018 and 2017, the Company’s customer finance receivable portfolio comprised 488,456 and 552,991 contracts, respectively. The Company follow specified internal procedures, including quantitative guidelines, for selection of its finance customers and assist in managing default and repayment risk in the Company’s portfolio. The Company originate all of the contracts through its authorized dealers and direct marketing agents with whom the Company have agreements. All the Company’s marketing, sales and collection activities are undertaken through dealers or by TMFL. Total vehicle finance receivables outstanding as at March 31, 2018 and 2017 amounted to Rs.23,881.18 crores and Rs.17,563.25 crores, respectively.

Tata and other brand vehicles — Spare Parts and After-sales Activity

The Company’s consolidated spare parts and after-sales activity revenue was Rs.4,993.28 crores in Fiscal 2018, compared to Rs.4,895.75 crores in Fiscal 2017. The Company’s spare parts and after-sales activity experienced limited growth due to weak sales of both commercial vehicles and passenger vehicles in recent years.

Tata and other brand vehicles — Competition

The Company faces competition from various domestic and foreign automotive manufacturers in the Indian automotive market. Improving infrastructure and robust growth prospects compared to other mature markets has attracted a number of international companies to India that have either formed joint ventures with local partners or have established independently owned operations in India. Global competitors bring with them decades of international experience, global scale, advanced technology and significant financial resources, and, as a result, competition is likely to further intensify in the future. The Company has designed its products to suit the requirements of the Indian market based on specific customer needs such as safety, driving comfort, fuelefficiency and durability. The Company believes that its vehicles are suited to the general conditions of Indian roads and the local climate. Its vehicles have also been designed to comply with applicable environmental regulations currently in effect. The Company also offers a wide range of optional configurations to meet the specific needs of its customers and intends to develop and is developing products to strengthen its product portfolio in order to meet the increasing customer expectations of owning world-class products.

Tata and other brand vehicles — Seasonality

Demand for the Company’s vehicles in the Indian market is subject to seasonal variations. Demand for the Company’s vehicles generally peaks between January and March, although there is a decrease in demand in February just before release of the Indian fiscal budget. Demand is usually lean from April to July and picks up again in the festival season from September onwards, with a decline in December due to year-end.

Jaguar Land Rover (JLR)

Total wholesales of Jaguar Land Rover vehicles (excluding Chery Jaguar Land Rover) with a breakdown between Jaguar and Land Rover brand vehicles, in Fiscal 2018 and 2017 are set forth in the table below:

In Fiscal 2018, Jaguar Land Rover wholesale volumes were 545,298 units, up 2.0% compared to Fiscal 2017. Lower sales of more established models partially offset the rise in sales driven by the introduction of new models. Wholesale volumes were up in China (11.0%), Overseas markets (13.0%) and in North America (3.4%) but down in the United Kingdom (1.1%) and in Europe (7.2%), reflecting continuing uncertainty over diesel.

Jaguar wholesale volumes were 150,484 units, down 11.1% compared to Fiscal 2017, reflecting the introduction of E-PACE offset by lower sales of XE, F-PACE, XF and all other models of Jaguar.

Land Rover wholesale volumes were 394,814 units, up 8.0% compared to the prior year led by the introduction of the Range Rover Velar and the all new Land Rover Discovery, partially offset by lower sales of Evoque and Discovery Sport. Sales of Range Rover and Range Rover Sport were also lower year on year on account of the model year change over, including the launch of our first Plug in Hybrid models, during the third and fourth quarter.

The wholesale volumes of Chery Jaguar Land Rover (China Joint venture) were 88,212 units from 66,060 units, reflecting a growth of 33.5% in Fiscal 2018 compared to 2017. This is mainly due to introduction of the long wheel base Jaguar XEL during Fiscal 2018 as well as the sales ramp up of the long wheel base Jaguar XFL at China joint venture.

Jaguar Land Rover’s performance in key geographical markets on a retail basis

Retail volumes (including retail sales from the China Joint Venture) in Fiscal 2018 increased by 1.7% to 614,309 units from 604,009 units in Fiscal 2017 led by the introduction of the Range Rover Velar, the all new Land Rover Discovery and the Jaguar E-PACE as well as continued demand for F-PACE and the long wheel base XFL from China Joint Venture. This increase was partially offset by lower sales of XE (long wheel base XEL launched in December 2017 with sales still ramping up), XJ, Discovery Sport and Evoque. Retail sales of Range Rover and Range Rover Sport were also lower year on year on account of the model year change over during the third and fourth quarter.

United Kingdom

Industry vehicle sales fell 11.0% in Fiscal 2018 in the United Kingdom due to the weaker automotive cycle, Brexit and the continuing uncertainty around diesel (diesel sales down 26.2% year on year). Jaguar Land Rover retail volumes decreased by 12.8% to 108,759 units in Fiscal 2018 from 124,755 units in Fiscal 2017, which was broadly inline with the decline in industry volumes. The introduction of Velar and E-PACE as well as continuing demand for F-PACE in the United Kingdom were not enough to offset lower sales of more established models, including the model year changeover impacting sales of Range Rover and Range Rover Sport, and the lower demand for diesel powered vehicles.

North America

Economic performance in North America was generally favourable in Fiscal 2018 with solid GDP growth and strong labour market conditions. Industry sales in North America were down slightly (1.1%) in Fiscal 2018 whilst Jaguar Land Rover retails increased by 4.7% year on year to 129,319 units from 123,527 units in Fiscal 2017. Jaguar retail sales were down 1.7% in North America as continued demand for F-PACE and the introduction of E-PACE were offset by lower sales of XE and other models. Land Rover retailed 88,464units in Fiscal 2018, up 8.0%, from 81,949 units last year led by the introduction of Velar and the all new Discovery partially offset by lower sales of Evoque, Discovery Sport and Range Rover Sport, primarily reflecting the model year changeover.

Europe

Economic performance in Europe has been improving during Fiscal 2018 with consistent GDP growth of around 2.5%. Industry volumes in Europe were up 3.4% but Jaguar Land Rover retail sales in Europe were down 5.3% to 133,592 in Fiscal 2018 from 141,043 last year, primarily driven by uncertainty over diesel. Jaguar volumes decreased by 10.1% to 36,248 units in Fiscal 2018 compared to 40,332 units in Fiscal 2017 as the introduction of E-PACE was more than offset by lower sales of XE, XF and F-PACE. Land Rover retails were 97,344 units in Fiscal 2018, down 3.3% compared to the 100,711 units in Fiscal 2017 as the introduction of Velar and the all new Discovery solid sales were offset by lower sales of other models, including lower sales of Range Rover and Range Rover Sport which were impacted by the model year change over in the third and fourth quarter.

China

Passenger car sales in China increased by 1.3% in Fiscal 2018 supported by GDP growth of around 6.8%, broadly in-line with the government’s target. Jaguar Land Rover retail volumes (including sales from the China Joint Venture) increased by 19.9% to 150,116 units in Fiscal 2018 from 125,207 units in Fiscal 2017. Jaguar retail sales in Fiscal 2018 were 44,705 units, up 52.3% compared to the 29,351 units in Fiscal 2017 primarily reflecting the introduction of the long wheel base XFL from China joint venture and continued demand for F-PACE. Furthermore sales of the long wheelbase Jaguar XEL from China joint venture started in December 2017 and are still ramping up. Land Rover retail sales were 105,411 units inFiscal 2018, up 10.0% compared to the 95,856 units sold in Fiscal 2017 led by the introduction of Velar and continued demand for the Discovery Sport and Evoque from China Joint Venture. Retail sales of Discovery were somewhat lower year on year due to the launch phasing of the all new Discovery in China during Fiscal 2018.

Other Overseas markets

Jaguar Land Rover’s retail volumes in the other overseas markets increased by 3.4% to 92,523 units in Fiscal 2018 compared to 89,477 units in the prior year. Jaguar retail volumes were 20,674 units, down 7.9% compared to the 22,455 units last year the introduction of E-PACE and solid demand for F-PACE was more than offset by lower sales of XE, XF and XJ. Land Rover retail volumes were 71,849 units, down 7.2% compared to the 67,022 units in Fiscal 2017 led by the introduction of Velar and the all new Discovery, partially offset by lower sales of Range Rover and Range Rover Sport, which were impacted by the model year changeover in quarters three and four.