Leadership messages

Dear Shareholders,

I am delighted to present the Tata Motors Annual Report for the FY 2018-19.

As the year has been challenging, it has been exciting. We faced external uncertainties throughout the year, starting with the increased axle load regulation, liquidity crisis, muted consumer sentiments and aggressive discounting – all leading to a subdued growth in the H2FY19, after a successful H1FY19.

Our continued focus on sales enhancement by market activation and new product launches, rigorous cost reduction and more efficient alignment of demand and supply helped us to deliver a comprehensive Turnaround across the board.

The market performance improved across all segments in CV and PV. In PV, as against the industry growth of 2.8%, TML outperformed the market with a growth of 13.9%. Market share for the year was 6.3%, an improvement of 60bps from the last year. In CV, after outgrowing the industry for H1FY19, we were impacted by the reduced market demand, leading to a more competitive environment, affecting our cumulative market share and resulting in a flat performance for the fiscal. However, the favourable mix of MHCVs and structural cost reductions led to a strong financial performance. CV delivered an industry-leading EBITDA of 11% and PV achieved an EBITDA breakeven.

Our financial backbone rests on the CV performance and therefore the CV business needs to keep firing consistently. We have intensified our sales efforts across the board by active engagement with the dealer community, the fleet owners, the financiers, the customers and the drivers. 100+ new products got launched in CV, addressing customsed requirements. Specific interventions have been launched in target markets and regions to make a sustainable impact on brand pull and sales acceleration. As a market leader, we have always believed in value enhancement rather than value erosion. Therefore, we will continue to play the game responsibly, but aggressively. Our service campaign ‘Sampoorna Seva’ promises to provide seamless customer experience through an extensive network of after-sales support and best-in-class Turnaround time. Our spare parts and aggregate business in CV grew by 36% in revenue and added to the overall profitability.

We achieved some industry first recognitions this year.

• CV launched the modular Ultra with a range of 14 trucks in the ILCV segment, available with highly customised options and fully built applications.
• CV managed the transition of increased axle load regulations for its MHCV range of trucks in record time.
• We unveiled four new products at the recent Geneva Motor Show - the Harrier, our entry in the mid-SUV premium segment and its 7-seater sibling, the Altroz EV and our showstopper, the H2X Concept, a sub-compact SUV.
• Nexon became India’s safest car, achieving a first time ever 5 Star GNCAP safety rating.
• Taking industry lead to shift focus from wholesale to retail, where the benefits for the entire value chain will be far reaching and long lasting.
• PV won the Manufacturer of the Year Award and CV bagged the top awards across seven categories including the most coveted honours, CV of the Year and CV Maker of the Year.
• TML regarded as the Second Most Attractive brand by ET and the Most Trusted Automotive Brand by Brand Equity.

Although the second term of the incumbent Government is likely to augur well for the economy, the ongoing muted demand scenario with the impending challenges of the BS VI transition in Q3/Q4FY20 make our business cycle volatile. The Turnaround therefore continues, as we put in even more rigour in execution to bring sustainability to our overall performance. Our immediate priorities would be to generate better profitability and cash flows through structural cost reductions and capex prioritisation, ensure a smooth transition into the BS VI regime with a portfolio refresh and product enhancements, and maximise the sales opportunity with the recent launches of Harrier, Intra and the upcoming Altroz.

As we commit to manage the present successfully, we need to lead the future sustainably. To step up the game, we are reprioritising our actions against five angles of attack – product, scale, cost, technology and digital – all centered on the customer. A comprehensive set of actions is underway to support our aspirations.

• Defining brands with the birth of our new modular architectures in CV and PV
• Accelerating cost reductions by re-energising the organisation towards challenging targets
• Building scale through simplification in our supplier strategy - 'more buy from less partners', unleashing economies of scale
• Driving technology through a unified Connected Vehicle Platform (CVP) to bring enhanced value proposition to the customer use cases
• Leveraging digital to bring immersive experience to our customers and enhance our interface with channel partners

Our new vertical for e-mobility is uniquely positioned to capture the EV opportunities in India. We are leading the ecosystem development by preparing a tailormade product strategy, leveraging the synergy between the Tata group companies and playing an active role liasoning with the Government in developing the policy framework.

We have demonstrated an innovation mindset in our product development process by receiving 104 patents last year, the second highest in India. We are currently working on a comprehensive strategy of mobility solutions to leverage Connected, Electric, Shared and Safe (CESS) conditions of sustainable growth by enhancing the organisation’s skill, capabilities and talent pipeline.

Our approach on safety, health, environment and sustainability evolves out of a long-term, holistic view for the processes and systems that govern the organisation by

• Increasing the use of renewable energy and improving our operational efficiency
• Supporting the climate change principles through reduced carbon emissions
• Fostering a safe and ethical workplace, promoting gender diversity
• Contributing to the Sustainability Initiative, covering 233 critical suppliers and 237 dealerships
• Rededicating to the cause of community development as our ‘Triple Bottom Line’ responsibility, spending Rs.22.4 crore on Corporate Social Responsibility (CSR) and touching over 7,23,000 lives in FY 2018-19.

In order to lead your Company successfully into the future, we need to be globally competitive, develop India centric customer solutions and be ahead of the curve. Our aspirations are high as we set ourselves towards a 5-year Vision horizon.

By FY 2023-24, we will become the most aspirational Indian auto brand, consistently winning by

• delivering superior financial returns
• driving sustainable mobility solutions
• exceeding customer expectations, and
• creating a highly engaged work force.

We remain committed to meet our aspirations and your expectation of further improved performance in FY 2019-20.

Thanking you for your continued support and confidence in our passion for your Company.

Best Regards,
Guenter Butschek
Mumbai, May 20, 2019

Dear Shareholders,

In the decade since Ratan Tata acquired JLR, we are proud to have created an outstanding, award-winning product portfolio. Designed and developed with passion and spirit by our talented team of pioneers, JLR vehicles, today, offer stunning, contemporary design and creative innovation for our customers.

We have formed one truly multinational company from our two quintessentially British brands, nearly quadrupling our turnover and tripling the size of our workforce.

Today, our internationalised operating footprint spans design, engineering and manufacturing centres of excellence across the globe with new technology hubs in Manchester, the UK, Ireland and Hungary and a state-of-the-art new plant in Slovakia. Through our strategy of responsible growth, our UK manufacturing operations have achieved carbon neutral status one year ahead of our 2020 sustainability targets.

We are committed to lifelong learning, offering education and skills development through the Jaguar Land Rover Academy that last year saw our people complete almost 17,00,000 hours of training.

Today, the automotive industry faces multiple regulatory, geopolitical and economic disruptions and technological challenges.

We have met stringent all new Worldwide Harmonised Light Vehicle Test Procedure (WLTP) emission norms, but extensive public debate around emissions, stricter regulation, increasing taxation and customer confusion have impacted diesel’s popularity.

An increasingly protectionist global trade agenda and the ongoing BREXIT uncertainty threaten our competitiveness.

And the technology revolution as we move from the Internal Combustion Engine to Autonomous, Connected, Electrified and Shared mobility – or ‘ICE’ to ‘ACES’ – means we are set to experience a period of greater change in the next five years than in the last 50.

Our financials for FY 2018-19 reflect these external challenges: lower turnover year on year, an operating loss and a one-time accounting charge to write down the carrying value of capitalised assets.

We have not stood still. We have initiated our Charge and Accelerate turnaround and transformation programmes, robustly and at pace.

• Charge is targeting GBP 2.5 BN of rapid cost, cash and profit improvements by March 2020. We have taken difficult, but responsible decisions affecting our people. Today, we have a leaner organisation.
• Accelerate is simultaneously driving systemic and structural improvements through a root and branch review of all our processes and working practices.

Both programmes are on track to make JLR a business fit for the future.

The next chapter in the story of JLR will be the most exciting – and demanding – in our history

We lead the ‘ICE’ to ‘ACES’ revolution in many areas, offering our customers the choice of clean and efficient petrol and diesel engines, mild and plug-in hybrid and battery-electric propulsion systems. Our Jaguar I-Pace, the world’s first premium electric SUV, has won the most prestigious accolades in the automotive industry: European Car of the Year and an unprecedented hat-trick at the World Car Awards in 2019.

Development and innovation in ‘ACES’ require open collaboration so we work closely with high-tech global partners to spearhead advances in intelligent, connected and autonomous driving technologies.

As we transform today for tomorrow, JLR is committed to realising our Blueprint vision of future mobility. We call this Destination Zero - zero emissions, zero accidents and zero congestion - harnessing new technologies to enable smart integrated mobility and improve lives in the communities we call home.

FY 2018-19 has been a tough year. I would like to thank all those who have contributed to the acclaim and recognition bestowed on our sensational vehicles. In a volatile world, our purpose remains constant: creating experiences that people love, for life.

The coming year promises to be an exciting one with the new Land Rover Defender making its world premiere. We look forward with a steadfast commitment to continue delighting our customers with more of the most capable desirable vehicles in the world.

Best Regards,
Prof Dr Ralf Speth
Mumbai, May 20, 2019