Tata Motors shares dropped 6% to ₹980.10 on the BSE after the company announced price reductions of up to ₹2.05 lakh on its electric vehicles (EVs) and popular models. These price cuts, aimed at boosting sales as part of the “Festival of Cars” promotion, raised concerns about weaker growth prospects. In response, global brokerage UBS issued a ‘sell’ rating, setting a target price of ₹825, which further fueled investor concerns. The company’s move comes at a time of rising inventory levels and a reported 4.5% decline in dealer sales in August, marking the third sales drop in this fiscal year.
The decline in Tata Motors shares was not isolated, as the stock fell by 5.6% to an intraday low of ₹977.80 on the BSE, making it the biggest laggard on both the Nifty 50 and the auto index. This significant dip followed the announcement of price cuts, which analysts believe signaled weak demand and a challenging market outlook for Tata Motors. The UBS downgrade and target price of ₹825 suggest the potential for further declines, raising questions about the company’s near-term performance and long-term profitability.
Tata Motors Shares Drop Amid Price Cuts and Inventory Concerns
Tata Motors’ shares plunged nearly 6% on September 11, making it one of the top losers on the Nifty 50 index. By 11:30 am, the stock was trading 5.57% lower at ₹977.80 on the BSE. The sharp decline reflected investors’ concerns following UBS Securities’ reaffirmation of a ‘sell’ rating on the automaker. UBS highlighted multiple downside risks, particularly margin pressures at Tata Motors’ luxury brand, Jaguar Land Rover (JLR), and within the domestic passenger vehicle segment.
UBS maintained a price target of ₹825, suggesting a possible 20% decline from the stock’s previous close. The brokerage firm’s note expressed caution about the company’s future, pointing out that the recent success of JLR’s premium models — including the Defender, Range Rover, and Range Rover Sport — was beginning to taper off. The order book for these premium models has returned to pre-COVID levels, and UBS expects an increase in potential discounts on the Range Rover model, which could further impact margins.
As the demand for JLR’s premium models softens, UBS raised concerns about Tata Motors’ profitability. The firm questioned whether the rise in JLR discounts would impact the company’s overall performance. Strong sales of JLR’s premium vehicles had been a key factor in driving Tata Motors’ average selling price, but the slowdown in demand for these high-margin models could put additional pressure on profit margins.
Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, noted that Tata Motors’ shares have been in a consolidation phase after reaching all-time highs. He pointed to the increase in inventory levels at dealerships as a medium- to short-term concern for automotive original equipment manufacturers (OEMs), which could affect the company’s profit margins. Bathini emphasized that while Tata Motors maintains a leadership position in the electric vehicle space, the broader challenges in the automotive sector may weigh on its stock price in the near term.
Technical Analysis of Tata Motors Shares Drop
Technical analysts have also highlighted concerns about Tata Motors shares following recent corrections in the stock price. Osho Krishan, Senior Research Analyst for Technical & Derivatives at Angel One, noted the technical weakness in the stock after the recent decline. He suggested that the ongoing sell-off could lead to further weakness, with intermediate support levels in the ₹980-960 range, and deeper support around ₹940. On the higher end, Krishan identified resistance between ₹1010 and ₹1030, which could be a challenge for the stock to overcome in the near term.
Ravi Singh, Senior Vice President (Retail Research) at Religare Broking, echoed a similar sentiment, noting that Tata Motors shares appear weak in the short term. Singh recommended a buy-on-dip strategy, suggesting investors look for buying opportunities around ₹920 with an upside target of ₹1,000. Despite the short-term challenges, some analysts believe that Tata Motors could present long-term value, particularly for investors willing to hold the stock through this period of volatility.
Adding to the current pressures on Tata Motors, the company recently announced significant price reductions across its EV lineup. These cuts are part of the “Festival of Cars” campaign, which runs until October 31, and aim to make electric vehicles more affordable for Indian consumers. The discounts, which go as high as ₹2.05 lakh on certain EV models, are intended to drive EV adoption in India, where the company is a market leader. Alongside the price cuts, Tata Motors is offering six months of free charging at over 5,500 Tata Power stations nationwide for customers who purchase an EV during the promotional period. This move is expected to make both intra-city and inter-city travel more convenient and cost-effective for new EV buyers.
While the price cuts and promotions may boost short-term sales, analysts worry about the long-term impact on profitability. JLR’s premium models had previously played a significant role in lifting Tata Motors’ average selling prices, but with the softening demand and increased discounts, the company could face margin compression. Additionally, the rising inventories at dealerships suggest that demand may not be keeping pace with supply, adding another layer of concern for investors.
In conclusion, the Tata Motors shares drop reflects broader market concerns about the company’s growth outlook and profitability. With UBS issuing a ‘sell’ rating and setting a target price of ₹825, the near-term prospects for the stock appear challenging. However, some analysts believe that long-term investors may still find value in Tata Motors, especially as the company continues to expand its leadership in the EV market. As the stock navigates technical support levels and broader market challenges, investors will be closely watching for any signs of recovery or further decline in the weeks ahead.
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