SCV turnaround, profitability, and cash flow stability will be crucial in positioning the CV business as a standalone powerhouse post-demerger.
28 Feb 2025 | 2542 Views | By Ketan Thakkar
As Tata Motors prepares to demerge its commercial vehicle (CV) business, Group CFO P B Balaji has laid out a clear roadmap focused on three key priorities—turning around the small commercial vehicle (SCV) segment, sustaining profitability, and ensuring cash flow stability. These priorities are not just part of a short-term ...
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As Tata Motors prepares to demerge its commercial vehicle (CV) business, Group CFO P B Balaji has laid out a clear roadmap focused on three key priorities—turning around the small commercial vehicle (SCV) segment, sustaining profitability, and ensuring cash flow stability. These priorities are not just part of a short-term plan but are crucial in positioning the CV business as a standalone powerhouse post-demerger.
PB Balaji, the Group CFO since 2017, sits on multiple boards, including Air India, Titan, Tata Consumer, and Agratas. As a key architect who has led the company's financial recovery and charted its path towards a debt-free zone and a dividend-paying company after a long interval, Balaji has also led the IPO for Tata Technologies and several key restructuring actions with Tata Motors.
With a strong presence in heavy commercial vehicles (HCVs) and buses, Tata Motors is intensifying efforts to recover lost market share in SCVs, navigate global market uncertainties, and maintain financial discipline. The company believes the demerger will allow for sharper execution, faster decision-making, and an enhanced ability to compete in the evolving automotive landscape.
“The turnaround for SCV is the top task for Girish and me—our number one priority,” Balaji emphasized. “We will get that back to 40%—that is the plan. There is no discussion on that; we will get there.”
Beyond the SCV revival, Tata Motors sees the demerger as a catalyst for renewed focus, empowering the CV business to operate independently and drive sustained growth.
Priority 1: Regaining Market Share in Small Commercial Vehicles (SCVs)
Once a dominant player with a 40% market share, Tata Motors' SCV business has slipped to 28%, requiring urgent corrective actions. While the company has invested in product innovation, dealer network expansion, and customer outreach, execution challenges have slowed the recovery process.
Balaji has clarified that reviving SCVs is the foremost priority as the CV business prepares for its independent future. “The SCV segment is taking longer to pick up, which we need to address urgently,” he admitted.
The company is working on strengthening front-end operations, enhancing service capabilities, and expanding financing options to reignite SCV demand. The demerger will provide more autonomy to the CV business, allowing it to respond more dynamically to market shifts and execute its SCV recovery strategy with greater agility.
Tata Motors' commercial vehicle market share is at its lowest at 36.18%, pulled down by falling share in the small commercial vehicle segment, which has slipped below 30%. The company's share in the pickup truck segment has been languishing below 20%.
“This is one area where we cannot afford to fall behind. The market is not forgiving, and we need to move faster,” Balaji stressed.
As the CV business becomes a standalone entity, restoring SCV leadership will be critical for future profitability and competitive strength.
Priority 2: Sustaining Profitability Growth
While Tata Motors works aggressively to recover SCV market share, profitability remains a central pillar of its CV business strategy. The company has focused on cost efficiencies, product differentiation, and service-driven value creation to improve margins.
The demerger is expected to accelerate this profitability push, allowing the CV business to dedicate resources more effectively and pursue aggressive expansion strategies across eight different divisions, which have been carved out to have a specialized focus.
“Our second priority is to continue the profitability improvement journey that we are currently on, which has been going very well for us,” Balaji stated.
Even as the company competes aggressively across segments, Tata Motors remains clear that price undercutting is not part of its strategy.
“We are not competing on price—there is no discussion. You can speak to all these guys and know them very well. None of them want to engage in a price war,” he emphasized.
Tata Motors' revenue in the first nine months of the current financial year has slipped 6.4% , and volumes were down 7%. However, the EBITDA margin grew by 120 bps yearly to 11.6%.
The company is betting on a broad product portfolio, incremental service revenues, and strategic investments to build a more resilient and profitable CV business post-demerger.
Priority 3: Ensuring Cash Flow Stability
Beyond SCV market recovery and profitability, stabilizing cash flow remains a top priority, particularly as the CV business moves toward operating independently.
Given the cyclical nature of the CV market, Tata Motors is working on minimizing cash flow volatility, ensuring that the company remains financially resilient across economic cycles.
“The third key focus for us is to stem the volatility of cash flows throughout the cycle. If we get that right, then we can focus on growth,” Balaji explained.
A stable cash flow structure will give the demerged entity financial independence, allowing it to invest in long-term expansion while maintaining financial discipline.
Challenges Galore
There are many areas for Balaji to address in tandem with Girish Wagh ahead of the demerger.
Despite commanding market share, the company's sales strategy has heavily relied on broad-based discounting, a key financial priority that it aims to scale back. Another challenge for Tata Motors' commercial vehicle (CV) business is that, despite its larger size and the most extensive portfolio in the segment, its financial performance remains weaker than that of its competitors in a highly competitive market.
In the small commercial vehicle (SCV) category, Mahindra has successfully retained its dominant position in the pickup truck segment and is now aggressively expanding into the sub-2-tonne category with the launch of Veero, its closest competitor to Tata Motors' Intra.
Tata Motors' international business remains a key area of concern due to its inability to scale up volumes and expand beyond SAARC and Africa. Ashok Leyland has also demonstrated greater success in growth and market development in this area.
Demerger: A Defining Moment for Tata Motors' CV Business
Tata Motors sees the demerger as a pivotal step that allows its CV business to stand independently, attract investors, and drive future growth with a singular focus.
With three clear priorities—SCV market recovery, profitability enhancement, and cash flow stability—Tata Motors is laying the foundation for a stronger, more competitive commercial vehicle business post-demerger.
Balaji believes the move will enable sharper execution and decision-making, helping the CV business capitalize on market opportunities faster.
“This is the reason why the CV business is being demerged. We believe that, with complete focus and dedicated drive, we can take this brand to new heights,” he concluded.
While the demerger marks a new chapter for Tata Motors' commercial vehicle (CV) business, providing it with the autonomy and agility to scale new heights in an evolving global market, external challenges remain significant, presenting a formidable task for Balaji as he navigates the company through these headwinds while steering it towards becoming two separate listed entities.