GST 2.0, which slashed prices across product categories, will benefit the automobile industry. Tata Motors has passed on the benefits to its customers, with price cuts for passenger and commercial vehicles. According to Girish Wagh, executive director, Tata Motors, “The reduction in GST on commercial vehicles to 18 per cent is a bold and timely step towards revitalising India’s transport and logistics backbone. With a rich legacy of trust and an expansive portfolio of future-ready vehicles and mobility solutions, we continue to be the partner of choice for those who move India forward, empowering businesses, enabling mobility and fuelling growth.”
For the company, it is not just about price cuts, although they are substantial. In the case of heavy commercial vehicles, the prices will come down between `3,00,000 and `5,00,000. For buses and vans, the range is between `1,20,000 and `4,35,000. Pickups can be cheaper by just over `1,00,000. However, Tata Motors seeks to transform the commercial vehicle segment, which drives India’s economic heartbeat and pulse rate, as it moves goods, supports trade, and links communities nationwide.
Now with the vehicle price cuts, the company hopes to slash the Total Cost of Ownership for transporters, fleet operators and small businesses. The strategy is designed to accelerate fleet upgrades and expand access to modern, and cleaner mobility solutions, which will help the operators to lower expenses, boost efficiency, and enhance profitability over the medium term. Hence, the initial prices of the vehicles is a beginning. The end is ownership expenses.
For Tata Motors, this has a dual impact. Domestic commercial vehicles and mass-market passenger vehicles will benefit from the simpler GST rates, and potentially-lower working-capital lock-ups. The 40 per cent slab on luxury cars may weigh on the Jaguar-Land Rover (JLR) portfolio. Apart from the India-related price pressures, there are global factors at work in the premium segment.
“China has raised tax rates for luxury vehicles, which has increased the tax incidence on models by 10 per cent. Given the weak demand macro in China, and an even weaker dealer profitability, JLR has decided to absorb bulk of the impact of the same in the near term,” explain the analysts at Motilal Oswal Financial Services, who wrote a recent report on the company’s performance.
The stock traded within a range in the past one month, with a low of `669, and high of `720. Over the past 12 months, the share price fluctuated wildly, between `1,142 and `536, or more than 100 per cent difference between the two prices. Motilal Oswal, however, maintains a “Neutral” stance with a June 2027 target price of `631. Another brokerage house, Deven Choksey, retains its “Accumulate” rating with a higher target price of `722. According to it, medium-term electric vehicle growth, and the strategic Iveco acquisition will help the company. On September 22, the stock closed at `696.
Motilal Oswal projects Tata Motors’ consolidated revenue at `4,538 billion in FY26, and `4,827 billion in FY27, with EBITDA of `472 billion and `547 billion, respectively. Adjusted FY26 profit will be `168 billion, implying an EPS (Earnings Per Share) of `45.8. Net automotive debt jumped to Rs 135 billion in Q1-FY26 from a net cash position just a quarter earlier, and the “bulk of this net debt has increased at JLR and currently stands at ` 106 billion.”
Deven Choksey estimates Q1-FY26 revenue at `1,044 billion, down 2.5 per cent YoY (Year-on-Year, and a steep EBITDA margin contraction to 9.3 per cent from 14 per cent a year ago. “Consolidated adjusted net profit declined by 34.6 per cent YoY to `34.8 billion,” its report stated, largely due to US tariffs and weak domestic demand for the passenger vehicles. The GST changes may help future sales and volumes in the lower-priced car segments.
The margins in the commercial vehicle segment remained “resilient at 12.2 per cent (+60 basis points YoY) supported by better realisations and higher exports.” The management expects the industry growth of about five per cent in FY26, helped by festive demand and a normal monsoon. GST cuts may push it further.
Passenger vehicle EBITDA margin slipped to four per cent amid “softer demand, higher input costs and increased promotional spends.” As mentioned earlier, global luxury demand softened. “JLR EBIT margin declined 490 basis points YoY to a multi-quarter low of four per cent,” as it was hit by US tariffs, higher warranty costs and weak Europe/China demand. The management feels that the EBIT margin in FY26 will be 5-7 per cent with near-zero free cash flow.
However, the key risks continue to be volatile global tariffs. Even if India strikes a bilateral deal with the US, the China-America trade stand-off may continue. This will result in slower demand for luxury vehicles, both in India and China. An additional area of concern is commodity cost swings. Analysts warn about the “continued weak demand” in key regions, which is likely to put pressure on margins. Rising net debt, execution risk in the Iveco acquisition, and potential GST 2.0 tax hikes on premium imports add to the uncertainty.
Despite near-term pressures, brokerage houses see structural positives. Deven Choksey feels that a “diversified segment strength, global portfolio expansion, and operating efficiency gains position Tata Motors for sustainable growth in the medium term.” The management is banking on a huge recovery in the domestic commercial vehicle market, higher penetration of electric vehicles, and Iveco integration that will offset the JLR volatility.
The company expects the market share in the commercial vehicle segment to inch up four per cent to 40 per cent by 2027, and go up by three per cent to 16 per cent in passenger cars during the same period. The company sold 10,000 cars on the first Navratri day, the day of the GST cuts. The shutdown at JLR plants is still not over. According to a recent report, which came before the GST slashes, of 35 analyst firms, half had ‘Buy’ rating, 11 maintained ‘Hold,’ and the remaining ‘Sell’ rating. However, this will change in the post GST 2.0 era. However, domestic sales of passenger cars, and the global performance of JLR portfolio will define and refine whether Tata Motors accelerates or stutters.
