Good day. Welcome to Tata Motors Q4 FY 2022 Earnings Conference Call. I'm joined today by Mr. Thierry Bolloré, CEO Jaguar Land Rover, Mr. P.B. Balaji, Group CFO, Tata Motors, Mr. Girish Wagh, Executive Director, Tata Motors, Mr. Shailesh Chandra, MD, Tata Motors Passenger Vehicle Limited and Tata Passenger Electric Mobility Limited, Mr. Adrian Mardell, CFO, Jaguar Land Rover, and then colleagues from the investor relations team. Today, we plan to walk you through the earnings presentation followed by Q&A. As a reminder, all participant lines will be in listen-only mode, and we will be taking questions via Teams platform, which is already open for you to submit questions. You are requested to mention your name and the name of your organization you represent by submitting the questions. I now hand over to Balaji to begin the presentation.
Thank you. Welcome everybody, and thanks for taking the time to attend the call. Going to the safe harbor statement, I want to take a minute on this to explain a few changes that we have put through in the way we are presenting our numbers, post the subsidiarization of the passenger vehicle and the electric vehicle business in India. Due to this change, the standalone business which earlier had the PV and the CV businesses, it now has just the CV business and all the debt that is there. As such, other than for dividend reporting purposes, it doesn't have much of a relevance in the overall scheme of things. What we have done here onwards is to actually start reporting numbers on a consolidated basis.
Accordingly, we have two segments in the consolidated results. One is the automotive segment and others. That does not change. Within the automotive business, if you read through our annual report, we'd have talked about Tata-branded commercial vehicles, which includes all businesses that do commercial vehicle business in the world. We have Tata-branded passenger vehicles, which includes all the PVEV businesses as well as our design centers, TMADC Pune, as well as the joint operation that we have with Ranjangaon with Fiat. That's the second vertical that we'll report numbers on. Of course, Jaguar Land Rover, no change. Vehicle financing, no change. This is a key shift that is there.
To help you understand the numbers as part of the data bank, you'll also have the comparative numbers of the past also being given in the same format so that you'll be able to track ourselves better. This is a significant shift that we are doing in our reporting, but it is just to, again, the whole thing viewed as consolidated downwards rather than the individual businesses upwards. That's a big shift there. Next slide, please. I would skip these slides for the interest of time, because you've seen these slides. Most of them are in the press, and there's a hell of a lot of activity that has happened in Tata Motors on the electrification journey, as well as the product launches that have been very, very intensive, all of this leading to strong results. Next page.
Similarly in JLR, where there have been a slew of actions that have gone through. A particular call-out is the announcement of science-based targets that we have for carbon emissions. That's something even you should expect in Tata Motors also in the coming year or so. Again, all other actions are all in the press you're seeing. Let's move forward. If I were to summarize the entire performance of the business, we are committed to a sequential recovery in the business, despite semiconductor and inflation challenges. That's exactly what we have delivered in this particular quarter. The business declined by 11.5% compared to last year, but at the same time, sequentially improved.
You would see that in the comparison versus the previous year as well as the Q3 versus Q4 numbers, and that's something we'll talk about as we go forward. We have a cash positive delivery in the year, in the quarter, at INR 7,900 crores, and of course, we delivered an EBIT of 3.2%, which again sequentially improved. Next slide, please. The drivers for this particular performance, you would notice from last year to this year, the big drop is volume and mix. Pricing of almost 10.6% has been put through, just to manage the inflation that we are dealing with. As far as profitability decline is concerned, JLR, we are well aware of the challenges on semiconductors that we have had.
The big call-out I'd want to leave you with Tata Passenger Vehicles, where I think this business has now delivered EBIT positive, PBT positive, quarter, which is a big shift in the performance of the business. Something again, we are committed to, but I think we are delivering it much earlier than what even we had originally planned. Net debt of course comes down to INR 48,000 crore, of which more than INR 10,000 crore—almost INR 10,000 crore—is just working capital related, which should reverse once growth comes back in JLR. Almost entirely that is JLR. Next slide, please. Let me now hand this over to Adrian to take us through the performance of the business, starting off with the fabulous Range Rover Sport that you see in front of you. Adrian, over to you.
Thanks, Balaji. Next slide, if you would, please. Okay. This is cash flow positive in quarter four and profitability flat quarter-over-quarter. We'll get into the details later. Next slide, if you would, please. Volumes obviously constrained by semiconductors. You're aware of that. We've taken our break-even down to about 70,000 units in the quarter. Underlies about 75,000, 300,000 a year. Order banks grown again to 168,000 units. Increases in Range Rover and Defender once again. It's worth being aware that within there, we have very few Range Rover Sport within that order bank. They haven't yet been released under the new vehicle. EBIT was 2%, as we said in the quarter. Free cash flow, GBP 340 million, up from the GBP 164 million in quarter three.
Liquidity is strong. It's GBP 6.4 billion, including GBP 4.4 billion cash on hand. Next slide, if you would, please.
Okay, this is sales quarter four. Go to the right of the page, you can see there 1% down on quarter three. When you look at the model families, it's really important to understand that the run out of our Range Rover product in quarter four is significantly impacting those Range Rover family volumes. You can see it there in the header, 5,000 units down. All other nameplates are a little lower, apart from Defender. Again, the cause is either model run out on Range Rover or supply. Our order banks are very, very healthy and growing. On a full year basis, down in all areas apart from the Defender family again, which again, is supply related in those areas. Next slide, please. By region, this one. It actually shows the regional breakdowns within the quarter. You see them there.
Actually, UK, North America, Overseas were up versus the third quarter. Europe and China down. China normally is, because Q4 is a Q3 is a bigger quarter normally in China with the new year kicking in place. But again, all of these numbers are impacted by supply constraints, and you see that within the growth of the actual order banks. Electrified units for the full year, 66% from 51% 12 months ago. And again, those units, of course, are constrained also. Next slide, please. This is our walk versus quarter three. I mean, broadly speaking, the EBIT number's flat. GBP 9 million loss in Q3, GBP 9 million profit in quarter four. A lot happening in the walk, but these are things you should, you know, instinctively be aware of.
Our volumes were higher, 11% in quarter four versus quarter three on a wholesale basis. I mentioned the Range Rover being down, and that significantly impacts our mix quarter-over-quarter. You can see it there, almost GBP 200 million. VMA continues to be very low, again, a symptom of where we actually are in terms of demand being much higher than supply. That's continued to drop. Quarter by quarter, we probably met at near the level it's going to be until supply lifts. Material costs, increases on commodities are starting to actually impact in quarter four, you see on the far right, the commodity hedges are offsetting it temporarily. D&A is higher as a result of introduction of the Range Rover, but we've offset that with efficiencies, building more cars within the plants you see there within inventory.
The other big call-out on this page is non-EBIT, but the revaluation of our dollar-denominated loans obviously is bad news there, -$85. That will continue with the strengthening of the dollar into the first quarter, of course. Next slide. I should say the data is EBIT related. It does ignore a GBP 43 million exceptional item for a reference later. Next slide, please. Okay, so this is year-over-year. Again, given the messages we've given you all year, this should be instinctive. It's just the data around it. Volumes are down significantly, but we have mix managed where we could and where it was possible to do so into our most valuable products. You see mix significantly higher. Huge improvement on VME year-over-year. We've talked about that often.
The contribution costs from a material cost perspective, that's accumulative amounts as a result of the challenges in the marketplace now. Inflationary pressures and commodity costs increasing. We've referenced capitalized engineering lots on lots of calls. That continues to be at a low point between engineers coming off our Range Rover products and before we actually get to maturity on our new reimagined architectures, EMA, of course, and Jaguar. Furlough not repeated year-over-year was a big year-over-year difference. We are consciously investing more in digital and in IT, which is within the administrative expense. That will continue going forward as well. I mentioned that revaluation number with the depreciation of sterling and the impact on our balance sheet, mostly on the loans, which is adverse year-over-year. That will continue also. Total year EBIT was -GBP 412.
The GBP 43 million, which is actually the position we've taken on Russia at the end of March, would have made an absolute loss PBT 455 in the. Next slide, if you would. Okay, look, our Refocus program continues to mature. It continues to develop value. We'll get into that. Our H2 FY 2022, this is underlying. It's actually 300,000 units. We do expect that to grow as our investments now start coming through for Range Rover and Range Rover Sport in FY 2023. We also expect it to grow because we will consciously now begin to invest more in the value generative side of our business, IT changes and in digital changes. We also are very low point on our marketing costs, ex-this marketing costs, because the order bank position.
As soon as we start to build more cars, we will generate more sales with more marketing. You should really think about this as our underlying, when conditions start to return to normality, will be 350,000 units or above. That's what you see on the page there. That hasn't changed for the last 12 months. Next slide, please. Okay, really important page to understand. This is our cash walk from the EBIT number to the free cash flow number. You can see in the middle there, look, these are things we've been talking about for three years now. Cash profit after tax has to be higher than our investment. You can see it was in the quarter by GBP 195 million. We've helpfully put the full year data at the bottom there.
You can see we were underlying cash positive for the year by about GBP 190 million on just 294,000 wholesales. That's why our underlying cash position is sub 300,000 today. With the working capital, full year was minus GBP 1.3 billion, which was greater than the free cash loss full year, GBP 1.1 billion. You can start to see as we are building more cars in Q4, that working capital will come back to us. That will continue to come back to us as we produce more cars during FY 2023. That money isn't lost. Next slide, please. Investment. We are at the low on our investment cycle, just GBP 469 million in the quarter. We do need to spend more here as well, and we do need to speed up those investments.
Please take this as a low in the cycle. Our intention is to be at GBP 2.5 billion. We do need to cash back a little bit from FY 2022, so we'll monitor that going forward. We have no anticipation we'll be at these levels for following quarters. Our guidance for next year is still GBP 2.5 billion pounds, and we expect actually, now the engineers are moving on to those new programs, we expect that to be much closer to the actual number. Next slide, please. Okay, just a few business items. I'll run through these quickly as well. You've seen the slides. Next slide. Look, the top of this page, you should be able to see pretty much anywhere in terms of the outlook from not only within this industry, but across industries.
Supply, you know, mostly chips, but generally supply, COVID lockdowns in China, inflationary pressures in Ukraine. Pretty much any company, if they were giving you a business environment, would use those four icons at this point, I suggest. Which is really good, because historically, we've used icons particular to us, like Brexit. None of that anymore. You know, we kind of have the same challenges others have as well. What you won't see is the brilliance of the products that we actually have at the bottom there. The Range Rover Sport, the back view, we'll show you the front view in a moment. Hopefully, you took the time to see the reveal on Tuesday night, the tenth of May. None of these orders are actually within that order bank yet. This is a stunning vehicle. Our order banks have grown to 168,000.
We got so much good stuff happening in the bottom, there's just no room for the new Range Rover. Right? Our opportunity, if inflation continues, because of the strength we have in our brands, Range Rover and Defender, will be to do pricing, but our offset for that is really the Refocus program, holistic program. I've told you about it a lot. We have a page later. Amazing performance in FY 2022. That will continue through into FY 2023, and the program will get better. Next slide, please. Okay, we did do better on wholesales. We've talked about a gradual improvement. We've talked quarter-over-quarter that would happen. Production was actually 82,000 units in the quarter, so we're able to build our own wholesale stock by a few thousand units as well. So Q4 was a better quarter for us.
We do have additional challenges in Q1, of course, with China and COVID, which we're monitoring very, very carefully. We may flatline for a short period of time on that volume. It really depends on how quickly those issues actually close out within China. Next slide, please. Okay, Ukraine. The sad events in Ukraine. Look, we focus what we can do, our efforts on the humanitarian response. You know, we have almost 70 employees actually within Russia, very loyal employees to Jaguar Land Rover, of course. We have 800 Ukrainian employees actually within our Slovakia plant, and we focus a lot of time making sure that their families are brought together. We've also given some Defender units, which of course are built within that plant, to the International Federation of Red Cross and Red Crescent Societies Red Cross in particular.
That's been a lot of the things that we can control and manage within the sad Ukraine position. We have taken a position on our Russian NSC, and that was the exceptional GBP 43 million loss. Limited impact on supply chain for Ukraine. Where there's impacts we're seeing, we are looking to actually look for alternate sources for those parts, given there doesn't seem to be an end to this terribly sad position in the foreseeable future. Next slide, please. Okay, we haven't talked to you a lot about China of late, and that's because China's been doing better, right? Given the China COVID, we felt there might be some questions around China today, so we included a slide today. Sales quality, of course, is discounted in the market.
What we would have shown you 12 months ago, they improved to 11%, while they just continue to get better. What does that tell us? There's still a starvation of supply and an excess demand in China and inventory continues to fall. Dealer stocks, actually, retailer stocks have stayed about flat over the last two years. An improvement up from a very high level on registrations, which again means local sales are happening, which is really positive and really strong profitability just on the vehicle sales here at 2.7%. Every one of the key metrics we show on China, these are the same key metrics we were showing when China was bad. We haven't picked some good ones. These are exactly the same ones. They're all super positive. The health of our China business is very, very strong.
Yes, obviously, it's been impacted by shortages of supply. We in the U.K. and in China are impacted by shutdowns in terms of the supply of cars produced in China, which was the key point I mentioned earlier through quarter one. Next slide, please. Okay, order bank has grown. The beautiful Range Rover, we finally find space for it within the presentation. 46,000 units, that will increase. 41,000 on Defender. Very few Range Rover Sport old ones in that database. That 168 is going to grow as we go through quarter one. Next slide, please. This is the beautiful Range Rover Sport. As I say, hopefully, you did have the opportunity to see the reveal on Tuesday. You know, obviously, off the MLA platform. This is beautiful to drive as well as the Range Rover is beautiful to drive.
It looks absolutely gorgeous in the color. The picture looks good, but you see that up close, it is just fantastic. Electrification, we've talked about electrification of our Land Rover products from 2024, including this connectivity, improved capability of our EVA architecture in terms of connectivity. We see that within the warranty data as well. Built locally to us in the U.K. I'll just leave that there for two or three seconds for you to stare at before I take it from the page. Next slide, please. The wonderful Refocus program, GBP one and a half billion in FY 2022, across pretty much all of the areas you'd expect us to focus on. A lot of activity in market performance continued into quarter four and will continue into quarter one and quarter two, particularly. You know, that's the antidote to shortages of supply, of course.
We've got a lot of work to do on cost, including now mitigating inflationary pressures. The teams are very focused on mitigating those pressures. To help us, the digital transformation program on both market performance and cost, we are getting much better and recruiting many more people to enable us to dive and see actually what's happening beneath the billions of datasets that we actually have. I've mentioned investment. We did make some investment savings. We are tough on non-product investment in the criteria, but we do need to spend more and we will spend more towards the target going forward. Next slide, please. Okay, one of the questions I'm sure is inflation. We try to be helpful here again as well. GBP 12.5 billion worth of cost last year.
We've identified the key areas of cost that we think is gonna be subject to inflation, commodities, semiconductors, energy, labor. You can see it there. It's about 20% of our total cost. What are we doing about it? Obviously, we're trying to mitigate those claims, but also that's why the Refocus program, in a sense, is there. It's for efficiency, capability, value generation, you know, sustainable solutions, all of those things. The program's maturing. We're confident over the course of a full year, we will offset those inflationary claims. The claims are hitting us early, so again, Q1 may be more inflation than offset. Over the course of this twelve-month period, we're very confident Refocus will offset the inflationary claims we're actually seeing. Next slide, if you would, please. Summary. Ongoing supply challenges, of course, compounded by the conflict in Ukraine and in China.
Commodity inflation. Volumes, well, we think grow, particularly as we get through the launches. You shouldn't underestimate, you know, bringing out a Range Rover and running out of Range Rover Sport and running in, would in itself mean a slowdown of volume until we were ramping those up later in quarter two. We're increasingly confident of our short-term EBIT target in FY 2024 and beyond, and also our cash targets as well. You see there the prioritizations is exactly what we've explained already in the presentation. I think that's the last slide, actually.
Thank you. Thanks, Adrian. Moving to Tata Motors Commercial Vehicles. This again, just to reclassify, this includes all Tata-branded commercial vehicles anywhere in the world as well. Move to next slide. I'll leave the numbers out there. Draw your attention to the powertrain mix. The particular call-out is the penetration of CNG and EV that we are seeing in the portfolio with ILCV at 40%, SCV commercial vehicles running at 38%, buses almost entirely. I mean, actually EV plus CNG there as well. It's a significant shift in powertrain that we are seeing as the fuel prices are starting to increase. The launch of the Ace EV that we have done just now hasn't come a day too soon. Next slide, please.
Really happy to report back that we are now increasing market shares across all segments, and that's happening after a long time. We also believe that the normalization of the SCV sales will also help us from an overall mix perspective as well. What really just stands out is a testimony to the quality of the products that are out there in the market, and that's being well received as you're well aware of. Next slide, please. Financially, I think this is the performance of the overall CV, Tata branded CV business, delivered an EBITDA of 5.9% on an EBIT of 3.4%. Basically, our call-out here is we look at the revenue growth at 29%, significantly higher than the volume growth led by improved mix and pricing.
Pricing has been playing a very, very large role. We have been increasing market shares and increasing price and improving sequentially the profitability. We are on the right track, and that's the trend that we intend to continue going forward as well. Obviously, the biggest challenges remain commodity prices, and therefore that's something we should keep a close watch on. Next slide, please. This is the walk that is there. The big investment that you're seeing in terms of fixed costs are all related to driving the growth of the business as we see it coming back as well. Next slide, please. Sorry, one call-out here. Just go back to the slide, is the unrecovered price. If you recollect some time back, we used to be calling this out at 540 basis points of negative unrecovered price.
That has come down. It's starting to narrow as pricing is starting to land in the market. Next slide. Girish, would you want to take that?
Okay. Thanks, Balaji.
Mm-hmm.
Highlights of quarter four and the year gone by. While the industry grew by 26% last year, we were able to outperform with a 33% growth. We grew our market share by 250 bps. The good point is, I think we were able to gain market share across all the segments, whether it is medium and heavy, intermediate and light, small commercial vehicles, as well as the passenger segment. I think the commodity inflation did impact us through the year and the margins were impacted, but of course, you know, we kind of scraped the bottom in the middle of Q3, and after that, towards the end of Q3 and Q4, we have been continuously improving with our comprehensive margin improvement plan.
Part of 510 basis points improvement, both due to the margin improvement plan as well as the operating leverage. Delighted to tell you that we've been able to grow our spares and service penetration consistently, and the penetration has grown almost two times in last four years. We are sitting about 30% now in both spares and service penetration. We will continue with our product offensive. Launched more than 80 new products last year, as also 120 variants that you will recollect. In the month of October, we in fact launched 21 products together, which were received very well in the market. Looking at the bright spots, I think the truckers sentiment index, internal metric that we continue to track every quarter is doing pretty well.
In fact, both in medium and heavy and intermediate and light commercial vehicles, over the last three years it is at a high now, so it's consistently improving over the past few quarters. The medium and heavy commercial vehicle demand does remain buoyant on the back of infrastructure work being done by the government. Even in intermediate and light commercial vehicle, it does seem well due to growth in manufacturing sector as well as e-commerce sector. As far as finance availability for medium and heavy retail customers, it is improving consistently. In quarter four, we have now seen the retail customers coming back into the market. Now, this is one point which we have been calling out consistently, that the retail customers are not there for MHCV.
I think the good point, they have started coming back, and that's one of the reason that the demand has firmed up in quarter four. Also a good point, CV passenger, which is the buses and vans, have been doing very bad, so to say, for last two years. I think in Q4 the demand has started picking up and we also see the trend continuing in Q1 of this year. Some of the challenges, we would like to call out inflation as one of the challenges to be addressed. You know, whatever fuel price increases have happened in the month of April have been compensated to some extent by the freight rate increases.
In fact, one has seen the freight rates go up consistently during Q4, in fact, from the end of Q3, which has been improving transporter profitability. It's just that the spike one has seen in fuel price increases has not been recovered fully. Otherwise, overall, I think the trend has been good because of fleet utilizations and freight availability has been going up. We are watching the situation on overall inflation in terms of fuel price increases and rate hikes. Closely watching it. I must say that the pipeline for customers has not yet been impacted and we see good pipeline in place, even in the month of May. As far as on the supply side, commodities are inflating further. I mean, we have had, of course, reduced impact in Q1 of this financial year.
In Q4, we had to give good increase in the steel prices as also precious metal. To address this, I think we do have a comprehensive margin improvement plan now in place, and we see a consistent improvement happening in the margins. On the supply constraints, semiconductors still continues to be a concern in few products in some of our diesel-powered vehicles as well as CNG-powered vehicles. I think we have been able to manage this pretty well. We have been debottlenecking it by looking at various levers, various alternatives, and by also building some strategic inventory. We think that, I think, towards the end of H1 of this year, it appears that we should be able to address this to a large extent.
I must also add that in this we have been focusing on establishing the new prices, right? We've taken another price increase on first of April in Q1 of this year, and there has been a lot of push in the market to establish these new prices. Go next, Dhiman. This time I, you know, I would also like to take a few minutes to explain some of the new areas that we have been pushing in the commercial vehicles. First one amongst them is electric mobility. Within this, I think we operationalized more than 250 electric buses in last financial year, mostly in Mumbai West and Ahmedabad, that is Ahmedabad Janmarg Limited.
Now cumulative we have more than 645 buses running on Indian roads with cumulative kilometers covered more than 35 million. All this is being delivered with an uptime more than 95%. I think we are developing a very good experience in this domain. We also have received a fuel cell electric vehicle bus order from IOCL. This is for 15 buses, and these buses will be delivered over the next two years. I think we are using this opportunity to develop this capability because we do believe that fuel cell is a very promising technology towards net zero pathway. Lastly, in electric mobility, apart from buses, we've also forayed into cargo e-mobility now with the launch of the Ace electric vehicle just a week back. Very encouraging response.
Delighted to tell you that on the same day of launch, we actually were able to sign a memorandum of understanding with quite a few e-commerce customers and their logistics service providers, amounting to almost 39,000 units on the same day. This is a very good beginning, and we are quite optimistic and positive about the small commercial electric vehicle. On the entire mass mobility solution, electric one, as mentioned, we have strengthened our play in the electric buses with own and maintain and operate model. We are delivering service on a per kilometer rate. We have now more than 400 buses running under this vertical.
I am also delighted to let you know that we have emerged as L1 in the tender, which was floated recently by CESL with a total quantity of more than 5,000 buses. We have been focusing on building a lot of capability in this vertical, both on the physical side as well as the digital side. Developing capabilities towards flawless execution, depot management, and also digital capabilities to ensure that we are delivering the best operating efficiencies to the customers. In addition to this, Balaji and team are working on what would be the right financial structuring for this business as we go ahead. We do see a very, very promising business opportunity in this area. On the digital front, a few things. First is, you know, a brief about Fleet Edge.
Fleet Edge is our connected vehicle platform in commercial vehicles, with an intent of enabling customers to manage their operations efficiently, bring down their cost, improve their asset productivity, and finally help them focus on their customers better. We have benchmarked this with some of the best in class platforms available globally and then built it ground up. To date, we have more than 200,000 vehicles on this platform and 90,000 customers with an average engagement time of around nine minutes. We have more than 75% monthly active users. Fleet Edge data is now being used by our team, Tata Motors team, to offer insights on fuel efficiency to the customers.
Therefore, this actually becomes a very good consulting, so to say, advice to the customers to improve their fuel efficiency and therefore operating economics, as also manage maintenance and therefore fleet uptime in better way. We have come up with two new value-added services, which is fuel efficiency management program as well as uptime guarantee, wherein we are leveraging all this data to provide this value-added services. We also see that more than 100,000 downloads have been there from Google Play Store and a rating of more than four from the customers who have downloaded and are using this. I'm also pleased to tell you that Fleet Edge now has the highest number of BS6 vehicles on the platform, way ahead of anyone else in the country.
In addition to this, we've also launched e-Dukaan, which is our digital storefront for spare parts during last year. We've been able to reach a lot of customers who otherwise were finding it difficult to reach our physical retail network. Delighted to tell you that in the first year itself we crossed revenue of INR 100 crore, and we have very aspirational targets even for this business. This is in summary about the commercial vehicle business. Balaji, back to you.
Thanks, Girish. Next slide, please. Among the passenger vehicles, is the entire Kaziranga range that just got launched and receiving very well by the market. Next slide, please. Here again, the numbers you have seen, draw your attention to two data points here. One is the domestic market share in the last quarter, touching now 30.4%, consistently increasing. The other is the fuel and the powertrain mix that you see, where CNG's penetration now increased to 9% and electric penetration now sitting at 7.4%. Substantial shifts that you're seeing in this one. Next slide, please. Here again, the EV market shares, 87% for the full year, 94% for the current quarter.
Charging infrastructure area where the numbers are starting to move up quite rapidly and we'll continue to keep pushing this higher and higher. Next slide, please. Financials, I think one of the key messages I'd want to leave you with is this business is on a very strong turnaround. It's increasing shares. It's delivering growth well ahead of market. EBITDA breakevens are now, you know, very strong, moved away from the breakevens to around 6.9% kind of EBITDA. It's now an EBIT breakeven business, and we also managed to do a PBT breakeven and cash breakeven this quarter. This business is now well and truly on track. This needs to be seen in the context of still significant challenges on contribution margins given the commodity price increases that we have.
That's something we have to deal with, but nice to see the momentum build up and operating lever starting to come through as well. Next slide, please. This you have seen, I'm not going to talk about. The only reason FME numbers are this high is the IPL numbers have to get provided for this quarter itself. That's the only reason that is there. Otherwise, nothing new in this slide. Next slide, please. Let me hand it over to Shailesh to quickly run you through the bright spots and the challenges.
Thank you, Balaji. Let me quickly give a first a flavor of what the industry was in Q4. We saw the easing out of situation of semiconductor supplies in Q4 as compared to what we had seen in Q2 and Q3 of last financial year. There was a 21% quarter-to-quarter increase in supplies. SUVs as a trend have been seeing continuous increase as a percentage of their share of TIV, and it increased by 8% to now 14% on the back of some new launches also, which happened during the year. As far as Tata Motors is concerned, Balaji already presented that last quarter we increased our market share to 14.4.
Also it was the highest ever sales both at a quarter level as well as for the full year of FY 2022 in our history of 22 years of being in PV business. We also emerged as the number one SUV manufacturer in Q4 FY 2022 on the back of four strong products, Punch, Nexon, Harrier and Safari. Nexon for the first time in the full financial year FY 2022 emerged as the number one SUV among 45 models that we have today. In Q4 EV sales touched 9,000 units, which was a penetration actually in quarter four of roughly 8%. A market share of 94% is what we achieved in quarter four.
Talk about, you know, FY 2023 on the, you know, predictions that we have seen from various agencies in our estimate point towards a possibility of the industry surpassing the peak that we have seen in FY 2019 of 3.4 million. This is on the basis that we had for the last two years, quarter one of both the financial years, FY 2021, FY 2022, we lost volumes because of COVID disruptions, and we are hoping that this year there will be no disruption of that nature. Also semiconductor situation might start easing out, and it is on the basis of that assumption.
Demand for EVs and CNG models are set to increase, and we are already seeing increased interest of customers in these two powertrains primarily driven by, I would say, increase in petrol prices. As far as Tata Motors is concerned, we have a very robust booking pipeline. The booking generation rate has been increasing. The channel inventory has been low at 9-10 days for the entire financial year of last year, as well as we see inventory levels remaining low. Strong response we have seen for SUVs, the four SUV which I talked about. In CNG, what we launched in January 2022 has also got some very strong bookings and is really all poised to grow well.
We are also going for certain capacity debottlenecking actions to further unlock the next phase of growth, that we have planned for this year. EV demand remains very strong and we are fast ramping up the supplies, to really catch up with the demand which is going, you know, exceptionally high. In the last six months, we have already ramped up our supplies by, I would say, nearly three and a half times. Talking about the challenges, Girish also covered the semiconductor situation, is what is still very uncertain and is restricting us to tap the full demand potential that we have. Commodity price increase is also, you know, one factor which might impact the profitability.
As far as Tata Motors is concerned, certain electronic components will remain a challenge, but we are taking multiple actions to mitigate this risk in terms of creating alternatives, additional resources, close coordination with some of the semiconductor suppliers and, you know, at times open market buys also. As far as cost is concerned, we will continue to innovate, focus on value engineering, and we have identified nine levers to improve our profitability in the next financial year. That's a quick update from the PV and EV side. Back to you, Balaji.
Thanks. Thanks, Shailesh. Next slide, please. This, we're shifting gears to the Tata Motors CV plus PV together just to get a sense of cash flows. So just a comparison here. You'll notice that the operating cash flows, the cash profit after tax is ahead of the investment cycle and the investment plans and efforts well funded internally. With the growth coming through, the negative working capital is generating the cash flows that you see at an overall level. We do expect to normalize this next year once the growth stabilizes. This is something that we should normalize. We'll also look at the amount of negative working capital that we can tighten that a bit so that we are able to release some of that. That's the next. Next slide, please.
Overall investment, the only call-out I have is we will be stepping up investments further between CV, PV and EV, both of them, and EV for CV as well. Therefore, we expect to see anywhere between close to about INR 6,000 crore of CapEx is what we'll be spending in. Rest assured, FCF remain positive despite the significant step up in investments. No change in strategy there. It is deploying funds more. Now that growth coming back we'll be able to deploy it better. Next slide, please. Taking a minute on Tata Motors Finance. You would notice this was an area of concern we had last time. The good news is that the corrections are starting to improve significantly, and we are compliant with the RBI PCA norms of prompt corrective action.
Having said that, ROE is at 5.4% is not something that we like. Therefore, we will be continuing to work on improving the market, the ROEs better by focusing on maintaining a market share at around 30%, reducing GNPA and NPAs aggressively, for which the collection strategy is being recalibrated, in line with the new norms that are coming in from RBI from October onwards. We will expand NIMs further and accelerate the digital transformation and also create new digital ROA accretive income streams as well. The business is clearly on message and delivering on the strategy that they have, and we will accelerate that going forward as well. Next slide, please. This brings me to the last slide, which is basically the looking ahead slide.
The key call-out I would want to make here is demand is likely to remain strong despite the geopolitical and inflation concerns. Given the strong order book, both in CV, JLR, as well as PV, and Girish explained eloquently the demand situation in CV as well, we do not see concerns there at this point in time. Supply situation is improving, albeit gradually. Commodity inflation is something that is likely to remain at elevated levels. It will be sticky. We do expect to deliver a strong improvement in EBIT and free cash flow as we get to near automotive debt free by FY 2024. That's the journey we are committed to.
As far as FY 2023 is concerned, the needed first quarter Q1 will obviously have the impact of the COVID-led China lockdowns that are there. This is something, once that is behind us, the performance will improve through the year. Like what we have promised sequentially, it should start continuing to improve there as well. Of course, individual targets are out there for all of you to see. With this, let me now hand you over to take any questions that you may have. Okay, the question queue is already built up. Let me now first start with the most obvious question, Jinesh Gandhi from Motilal Oswal. Can you please provide India pro forma P&L to make it comparable with elsewhere standalone?
Would it be possible to share the PAT of CV and PV business on a quarterly basis? Jinesh, I think we are moving to a consolidated now because it is meaningless to look at the standalone number, just the CV minus interest rate. Therefore, I wouldn't want to do a pro forma on that. I would rather encourage you to move to the new model. You already have full comparison across time. We are anyway giving it to you. So definitely would encourage you to look in that direction. From a materiality perspective, the CV business in India is something which is quite likely the dominant segment there. PV is almost entirely India.
Therefore, it is pretty comparable to what it used to be in the past, but it is something that we would want to encourage you to move towards this consolidated. Let me move on to the other questions that you may have. Again, Jinesh Gandhi, I think, on JLR, Adrian , would you wanna take this one? FY 2023 target of EBIT 5% and FCF of GBP 1 billion is based on what kind of volumes. Do you expect this mix to normalize in first half FY 2023 or phase out of RRR support, will it restrict the mix normalization to second quarter or third quarter?
Yeah. Thanks, Balaji. We do expect volumes to increase, particularly as our Range Rover and Range Rover Sport products come through. You won't see a full year number this year, which is as strong as we run out the year. You won't see that. I can model 5% in GBP 1 billion cash flow on a series of volumes because we will actually target the volumes which is highest value. It will be higher after quarter one, quarter by quarter towards the end of the year. I'm not gonna give you a number because actually I don't know when COVID's gonna close in China, and I don't know when the semiconductor's gonna improve.
Let me reassure you, there's a variety of volumes the way we're doing this, which will enable us to get to 5% EBIT and free cash flow GBP 1 billion going forward. It would need to lift in the second half of the year. Expect mix to normalize in half one. No, I do not. That's the phase in, phase out. Expect the phase in, phase out period to be half one. Quicker on Range Rover, slower on Range Rover Sport. They're three months behind each other. So you're really gonna have to start to see Q3 data for us to talk about, you know, what the new norm actually is. Hopefully by then, the China position is closed down and our semiconductor position has eased as well.
I did say to you in February 2021, you know, it's 18 months before we saw a version of normality. The reason why I said that was because of the running rate of those two products. You won't actually see that come through until second half of the year.
Yeah. The last one is on the consolidated cash flows. Your plan, how do you plan to raise FCF of INR 48 billion in two years to attain your net debt zero by FY 2024? Let me take that question. I think, two pieces here. We are saying anyway, there are three ways in which we intend to look at our cash flows, primarily being FCF. Second is monetizing in non-core, and any residual equity, if at all thereafter we need, we'll look at it. The strategy doesn't change. Obviously, it'll be fundamentally weighted towards free cash flows. You would notice even this year, the free cash flow is basically working capital, that is the one that has drained us. As growth comes back, similar to Tata Motors, we do expect to see JLR restore its numbers as well.
Adrian has already talked about GBP 1 billion cash flow in the current year, and as growth picks up, that number will pick up even further. We are quite comfortable that this plan that we have put out there, that's the reason we are reiterating it, and that is something that we will deliver as well. Moving to the next question. Just give us a minute please to get our technology sorted. One minute please. Okay. PHEVs are facing. Who's this from?
Just take it up.
It is from Pramod Kumar, UBS. PHEVs are facing headwinds with customers opting for BEVs. EU March quarter BEV +0.3% versus -5% for PHEVs. Regulators scaling back support, with Germany phasing out incentives and China imposing license restrictions. How does it affect our long-term confidence in the market, given JLR's high dependence on PHEVs till 2024.
Take that?
Yeah.
Look, PHEV and BEV total in Q4 was 14%. It is increasing. We anticipate that to continue until the full BEV offerings actually arrive in two years' time. We expect our BEVs and our PHEV combination to double over the next three years, and then double again over the following five years. You know, we do actually see, and we do have a lot more demand in that order bank for PHEV units. What you're suggesting here isn't actually within the data set that we have today. They are constrained, like other products, by shortages in supply.
Okay. Thanks, Adrian. Rakesh from BNP Paribas. GBP 500 million of lower investments in JLR compared to the planned levels. Where has the cutbacks been made, and will that not be needed to be done in FY 2023, implying higher CapEx needs in FY 2023?
Yeah. There's a mixture of reasons why the GBP 500 million is down. As I say, some was an undefined spend, and we have quite critical determinations for what we allow returns on investment. Some will be caught up as we go into FY 2023. Whether that means we breach GBP 2.5 billion with that, within that catch up in FY 2023 or in FY 2024, I'm not certain yet. There is some of that catch back which we actually need to do, and we have no intention of saving money in areas that we need to spend.
Okay. Thank you. The next is from Prateek Poddar, Nippon AMC. Question to Girish. Recently, Tata Motors was L1 in the CESL tender. Can you please explain the unit economics of the order? The rates quoted were extremely competitive and very close to highest counterparts on a INR per kilometer basis.
Yes. Prateek, I mean, I would like to give some context. See, you know, we have been operating almost 3,000 buses in Delhi for the last 10 years, right? Many of these buses have covered more than 0.7 million kilometers, but they still operate with 95% uptime on a daily basis. We have a huge amount of experience over these 10 years under our belt, which we have distilled into wisdom among the people. In addition to this, I think we have been into this electric bus market now almost for two and a half years, with buses being run over six cities. All this experience has been put together and we actually assembled a team of almost 100 professionals.
They looked at each and every cost element which goes into forming the rate of INR per kilometer. We looked at optimizing each and every cost element, bringing in efficiency in each and every cost element. Then finally, we were able to come to the most efficient kind of a number, which we have quoted. We are quite confident to not just deliver on this, but also to make money at the rates at which we have quoted. I think there is a humongous amount of work which has gone behind quoting this and experience and wisdom of operating buses for almost 10 years. Balaji?
Yeah. Thanks, Girish. Next question, Thierry, this is coming your way. This is from Pramod Amthe, InCred Capital. Considering uncertainties of supply chain and commodities, what gives the management the confidence to give an absolute value guidance for JLR? And the second question is, good to see an increasing order book, but how has that order cancellation trend been in recent months as new EV capacities are being created in Europe? Thierry?
Thank you, Balaji. Yes. Concerning the first point, of course, the uncertainty around us is quite big. At the same time, we can see gradual improvements quarter after quarter, even if the speed is actually not the one we would expect, the reality of the actions that we are performing better and better is giving us the confidence that we will continue on that trend and hopefully accelerate it. That's the first element. Concerning the robustness of order bank, I would say that the desirability of our products is such that cancellations are almost non-significant as a fact.
Thank you. Next is from Joseph, IIFL. From December end to March end, we have seen an increase in JLR inventory as well as retailer inventory. How do you explain this given such a strong order book? Adrian?
Yeah. Look, I see this as a really healthy sign because we've got several things we need to do here. One of them is to refill the pipeline. Over the last six months, we filled about 15,000 units back into the pipeline. I'd expect this trend to increase and to continue. You need to think that our footprint is global. You know, it can take us 90 days to get a car to a wholesale point, or two days. It depends on where they're going. Our intention is to refill the whole pipeline. You will see inventory increases once we start getting up in total from the 66,000 units today, 30,000 we own, 36,000 the dealers own, to around 90,000, and the health of our pipeline would have been rebuilt.
It's gonna take a few quarters along with that supply position we've talked several times. This is a good and a healthy sign.
Okay. Maybe I'll take Kunal Bhatia's question from Dalal & Broacha. Working capital requirement is expected to increase in JLR with the pickup in volumes and activity. I don't think so because it's a negative working capital business and therefore actually generates cash as working capital as business growth comes in, so you don't need to worry about that. EBIT margins target for 2023, 2024, 2025. You've talked about 2024 and 2026, and FY 2023, we have talked about 5%, so most of the numbers are there for you from that perspective. Let me then cover, say, Nomura. Congrats on the team on a strong performance, JLR. What's the volume outlook for first quarter FY 2023 and 2023 forecast? Any broad range will also help. One.
How do you see ASP in FY 2023 versus FY 2022 in India? Sorry, let me come to that. Shailesh, it's coming your way subsequently. It's definitely the first question, Adrian.
Yeah, no. Quarter one is gonna be a difficult quarter because of China. Let's see if we can continue the gradual improvement. FY 2023 will be stronger than FY 2022. You know, the big things again are Range Rover changeover, Range Rover Sport changeover, China COVID, a little bit of Ukraine for us, and then the semiconductor pieces. As they start to lift, you will start to see the volumes lift and our order bank stabilize.
Thank you. Shailesh , your view. How do you see the selling price in FY 2023 versus FY 2022 for Indian EVs? What's our order book and monthly order inflow for EVs and overall? And how much % production loss do we have due to supply constraints in April or May? And how many EVs will you launch possibly? We've gone one after the other. Kapil Singh. Okay.
Maybe let me attend the first one. It's very difficult to really, assess what will be the change in ASP, especially because of how the commodity situation is going to play out, and therefore, the extent of price increase that we are going to take. From a mix perspective, I would say, it would be pretty much in line with, the mix that we have seen in Q4 and the realizations that we had. It would be pretty much in those lines, and additional, you know, price increases that we might take. That is the kind of guidance I can give at this stage. As far as order book and monthly order inflow is concerned for, let's say EV and overall. Okay.
For overall, I would say it would be about 3-3.5 times of our monthly supply rate. For EVs it would be about five months. I cannot give you the exact number for sensitivity reasons. How much percentage production loss do we have due to supply constraints in April or May? Not going to talk about May, but as far as April is concerned, I would say that we have been growing. We have. If you see month-on-month, we have been growing as far as our supplies are concerned, and we were able to still hit the number of 41,000-42,000.
In terms of what we could have produced based on the capacity and the order book that we had, I would say it would be still a 10% loss, which would have 10%-15% loss that we would have incurred in terms of the supply constraints that increased in April. How many EVs we launch in FY 2023? We have launched one yesterday. We have already mentioned that in the next five years we are going to launch 10 products. So you can expect, you know, you know, two products at least in every financial year, is what I can say.
Thank you, Shailesh. Adrian, this is coming your way. You appear to be losing retail market share in most of the developed markets. I understand that with semiconductor issues, market share dynamics are different. Such low market share, will it not impact the brand?
Yeah.
Adrian, carry on. Any of you, actually.
It is clear that we are impacted more than some of our competition, for many reasons that we have also developed. I remember in some of the previous meeting we had together. We are mitigating that with a big array of actions, especially some long term strategic agreements, which are helping to make it such that we have a much better allocation. That's why gradually we are improving the situation. Yes, for sure we are losing some market share. At the same time, the impact on the ground is maybe to the contrary, a higher desirability. Because scarcity is creating that desirability to be even higher, to an extent which are sometimes a little bit incredible, that we are even surprised. We should maybe not, but we are.
Because of the incredible appetite of the customers and clients for our products. We cannot supply enough. The brand, to a certain extent, is even boosted towards modern luxury at higher level than we expected, and faster.
Yeah. Thierry, maybe the next question also to you, coming in from Sonal Gupta, L&T Mutual Fund. Visibility we have talked about. Let me not put you there. I think there's another interesting question. How much improvement do you expect driven by alternate sourcing, by reprogramming, redesigning vehicles for other chips, assuming existing supply levels don't change from FY 2022 levels, and your plans for that?
It's a very interesting question because we are at the heart, probably of some differences we have with our competitors. Our products are super complex. We know that we have chips which are very sophisticated. Very often they are proprietary chips, so the alternatives, you know, are much more difficult or longer to put in place to redesign with our Tier 1s or directly with some of our chip suppliers. We are aware that working hard on that angle as well. Along with, as you understood, with the creation of an incredibly intense and fruitful dialogue with our suppliers. Not only Tier 1, but of course even more with our chip suppliers.
So far, the level of attraction that we are creating for us, especially now that we are sourcing new businesses, is making such that we are as well improving the short-term supply, just because of the huge interest that we are creating for them. That's the way we are improving the situation, by having all these parallel actions together.
Thanks, Thierry. Again, from Sonal to Girish, this is coming your way. What's the plan for CNG on side of heavy commercial vehicles?
Right. Sonal, I think on CNG, the balance has to be done between the range and the payload, right? Because for higher range. I mean, generally, heavy commercial vehicles are meant for longer range use, and therefore they need longer range. Knowing the retail infrastructure of CNG, I think essentially you need the longer range. We have been selecting applications where the range requirement is lower and bringing in products there. You would have seen small commercial vehicles mostly used for intra-city applications, intermediate and light commercial vehicles also intra and to some extent intercity. There we have seen a very good penetration of CNG. We are certainly looking at some applications even in medium and heavy commercial vehicles, where it makes sense to move towards CNG and sufficient range is available without compromising on the payload.
You will see some action coming from our side during this year. We are quite clear that this movement towards alternative fuel is here to stay because it makes sense for the customers as well as for the country at large.
Thanks, Girish. Question to Adrian from Chirag, Edelweiss. Can you give a production range that you can achieve in Q1 and Q2 based on current visibility, acknowledging that it can change, Adrian?
Yeah, sure. I'll go back to what I said before actually, rather than give you any numbers. Quarter one, it's going to be difficult to lift quarter one because of the China position, the Range Rover position and the Range Rover Sport position. We do expect some of those things, particularly our Range Rover, to actually increase production as we go out of quarter one. Range Rover Sport, new all-new production at the end of quarter one. It's reasonable to assume Q2 will be stronger, notwithstanding developments in China, of course.
Thank you. The next one, again from Chirag. Rundown on new launch impact of Range Rover Sport. Is it restricted to Q1 or H1? As an extension, can we expect normalized volumes of 15K a quarter for Range Rover? There's only 5K in Q4 impacting ASP.
Rundown is Q1, ramp up is Q2. It will impact both quarters and the first half on Range Rover Sport. On the Range Rover, I'll say to you what I said two years ago on Defender. I said then 5,000 units a month is a healthy benchmark for us. We're pretty certain we'd be significantly higher than that if we could build them today. On Range Rover, I'm going to say, yes, you're probably right. 5,000 a month is a healthy baseline for us. If you then backload that into 50,000 orders that we have today, with that would suggest we are flat out on the planet, sold out for 10 months. That's telling you it's likely to be higher than that as well.
Thank you. For JLR and CV business, how do you see the emerging traditional demand headwinds, inflation, tightening liquidity? In the past, these segments had a significant impact on EBITDA. Maybe JLR, I'll pass it to you, Adrian, and Girish, CV coming your way.
Yeah. Look, you know, all of the things you've listed here are the things which you'd expect us to impact this year's results. I'll reference what I said earlier on inflation. We think the Refocus program is strong enough to eliminate that and, you know, across all of the headers that we actually have. Yes, inflation will impact, but we expect the offsets to actually be in place and zeroize that problem for us this year. The real big thing again is the amount of volumes we're able to produce. Very healthy sales. You saw that in China, but across the piece, VME will be strong again in FY 2023. It really is all about the volume position.
Thank you. Same question to Girish, your way.
Yeah. You know, in the commercial vehicles, let's look at customer profitability first and then the company margins. As far as customer profitability is concerned, I think more than interest rate, it is the fuel price which has a bigger impact. If you see the operating economics of a transporter, the impact of fuel price is almost 2-4 times that of the interest rate hike. We'll be more concerned about the fuel price hike and then followed by, of course, the interest rate hikes. Now, demand is always dependent on what is the kind of balance or imbalance which is there between headwinds and tailwinds. As of now, we see good tailwinds in terms of availability of freight for transportation.
Therefore, till now at least, whatever headwinds have been there in terms of fuel price and interest rate hike seems to have been overcome with freight rate increase. As I said in the beginning, we are keeping a very close watch on this because this balance is very important, and then we'll keep a track of this. Now, coming to our profitability, I think we have spoken often that steel price increase has the largest impact on the CV profitability. This is something that we've been watching and also having our own actions to reduce the impact of steel price increase.
Thanks, Girish. The next one is from Amyn Pirani , JPMorgan, on China. We have discussed the supply chain issues on account of China lockdowns. Is there a risk of demand getting impacted due to the disruption in economic activity? And can you share any latest trend for April and May in terms of order intake in China? Thierry?
I think the impact is massive as we speak for all brands for the global industry. My orders of magnitude for the last month is, for the industry, it's about minus 40%. On the premium side, it's even more than 50% decrease for all brands included. That's the normal situation because the traffic in showrooms is almost zero because people cannot get out of their homes. The situation in which
Part of the country, but a significant part of the country, is such that, I think people are thinking about other things than, buying a new cars at the moment. However, as soon as the situation is going to come back to normal, the appetite to catch up, and we can see that with all the contacts we have and all the insights we have in the country, is absolutely massive. Massive. By the way, it's happening in many countries. When they get out of COVID, suddenly people want to travel, suddenly people want to enjoy life again, and buying a new car is part of that. I've no real big concern except that we expect the country to recover as quickly as possible.
Thanks, Thierry. The next one is from Kapil Singh, Nomura. Tata Motors has a significant volume ramp of plans for EVs, for PVs, for buses, for CVs. What kind of synergy, what kind of advantages can these give from a synergy perspective? Shailesh, Girish, to both of you, I believe.
Maybe I'll start and then Girish can add. We have really looked at each of the segments in CVs as well as PV, fleet, as well as the personal segment, and we are trying to see where the potential synergies can be in the area of motor as well as in the area of batteries. Batteries, especially the chemistry that we would like to choose, the form factors, as well as the C-rate because of the fast charging capability and all. Based on this, we have certain areas where we have seen convergence, especially, let's say for example, SCVs and the fleet segment and PV, where there are certain commonalities that we have seen in the low voltage category.
Over a period of time, we have taken a view of next 4-5 years, and we clearly see certain alignments as far as the choice of chemistry is concerned. It's an ongoing exercise. As we are growing, we are expanding. Different segment require different kind of choices to be made, different power ratings, and therefore there are areas of synergies but also areas where we have to be different.
Girish?
Completely addressed.
Okay, fair enough. The next question I would take, how are we planning to secure battery supply for such large volumes? As we had indicated earlier, I think, there's clearly a plan for, from a Tata Group perspective to look at, setting up battery facilities. We have consciously, we discussed this last time, we have not applied for PLI, because we found the conditions to be onerous. At the same time, we are very clear that this is something that we will want to set up. Plans are in progress, and as and when we are ready to share them, we will do so. In the meanwhile, there are clear plan or in the intermediate period between now and till the time the factory comes up, traditional battery sourcing strategies are being implemented.
Shailesh , next to you from Raghunandhan, ICICI Securities. Can you please share current EV production capacity? How do you see that?
See, you know, earlier when we had started our EV business, we had an offline arrangement of fitting the EV powertrain. There we used to have an issue of capacity, which was limited to start with. For all our products now, we have integrated in our main assembly line. Literally we can fully convert the ICE capacity into EV. Internal capacity is not an issue. As far as certain supplier capacity and certain component capacity is concerned, we have enough headroom than what we are supplying right now. We have also come with a very comprehensive plan based on the volume projections that we have to add new lines in the area of battery packs, the drive line, and power electronics items. As far as capacity is concerned, we are absolutely on track.
Something which is really stopping us or restricting us to unleash the full potential of demand that is out there is the issue of semiconductors.
Thank you. Thanks, Shailesh . The next question is from Gunjan Prithyani, Bank of America. On JLR, can you give us some color on the commodity hedges that JLR has? How do we expect commodity inflation from metals to flow through to P&L?
Yeah, thanks. I'll refer you back to slide nine in terms of the actual position. You know, the material cost was down GBP 80 million quarter-over-quarter, and our hedges were up GBP 82 million. Those hedges are running off. In terms of our specific exposure within there, aluminum is our biggest exposure. You know, I think over the course of the next 12 months, we have about 25% of that hedge, more of it in the short term, less in the second half of the year. If this continues into the second half of the year, we'll certainly be more exposed. Again, I referred to what I said earlier. You know, we expect the Refocus program to offset all of our inflationary costs, including the increases in commodity costs in FY 2023.
May not land evenly by quarter, but we certainly, over the course of the year, will offset all of these costs.
Thank you. Next question again to you. VMA has come down below 1%. Do we expect these low levels to sustain through CY, through the financial year 2023? How should it pan beyond that?
On Jaguar Land Rover, the 1%, look, that is the low supply number, 1%. As we resupply, that number will increase during the course of the year. Whether it stays at 1% will really depend on speed of resupply. When we do resupply, the product sell outs, the biggest order banks, you know, and the biggest demand will have the lowest VMA, Range Rover, Range Rover Sport, and Defender. Actually, I see us being in quite a healthy position in the foreseeable future because of resupply, slowness to resupply, and then those products are very, very sought after.
Thank you. I think the next question Girish has asked is about CV business. Can you talk about fleet operator economics? Girish covered it quite extensively in his setup, therefore, I'll skip that. Also how are OEM discounting trend in the market? Girish, you wanna talk about that?
Yeah. I think the last year we had two COVID waves. First one was in Q1, and the next one, a minor one, was in Q3. We know whenever the demand goes down, I think, the OEMs keep on fighting for lower volume which is available in the market. Those were the times when the discounts have gone up. I think we should also keep one thing in mind, that there has been significant price increase, which has happened during the last year due to the commodity price increases. I think point to point, price increase during last year has been upwards of 9%. You know, the pass-through within that has not been full, has been part of that, which has therefore led to increase in discount in absolute terms.
If you look at the movement from first January of this calendar year to now, I think gradually the market operating prices are going up, which is therefore helping us to improve our realizations. We have seen on the operator side in terms of their economy, where I think the freight rates have also been going up. Overall, we see improvement in their economics and we have also been improving our realizations.
Yeah. Just to amplify that point, if you notice the waterfall that we had earlier, we used to be having unrecovered pricing of almost 500-600 basis points and that we used to call out. That is now down to 200 basis points. That speaks to the 200 basis points there. Next question is from Ronak Sarna, Systematix. No, I think that's been covered, so let me skip that. Let me go to Priya Ranjan at GNFC. I think this is probably coming your way. Can you throw some light on the scope of tie-up with NVIDIA? Is the scope including existing programs or for the future EV programs? Also we are entering with. Let me stop there, then go to the next question.
Yeah. Well, the partnership we have with NVIDIA is really going to be visible in the next generation of cars, the EV cars, you're absolutely right. On all our products actually with state-of-the-art capabilities in terms of ADAS and ultimately autonomous driving. We are working hard with them and it goes very well. It's very much on track.
Thank you. The next question also to you, we are entering with e-racing circuit. In connection we already had the e-racing circuit. Just a question on the positioning of Jaguar. Do you wanna position Jaguar as racing or fast vehicle based on E-Type legacy?
We want to reinvent completely our brand, of course, using the best of its legacies, but preparing, and you will see that copy of nothing. A copy of nothing means also, and because of the legacies, the great legacies of our brand, making sure that we are going to demonstrate an absolute technology superiority. This is where in the EV world, what we are performing with the E-racing is absolutely fantastic when you see the magnitude of what we can translate from track to road. We have plenty of examples that we are capitalizing on at the moment and even enhancing so that we can have the ultimate technologies in terms of electric drivetrain and of course, specific controls.
Might that be battery management systems or electronic architecture and so on and so forth?
Thanks.
Without forgetting, of course, the absolute semiconductor technologies to make that happen.
Got it. Thanks, Thierry. Next question, Shailesh, this is coming your way. This is from, again, from Priya Ranjan at GNFC. What has been a recent trend in R&D hiring for the company? And what kind of additional or new capability buildup are we doing? And JLR and Avinya, maybe let me first ask Avinya, what kind of voltage architectures are we planning for?
As far as hiring and R&D is concerned, of course, we are going for major hiring, especially this year. There is also another area which we have looked into very deeply is upskilling the current engineers within our R&D. That's going to be also a big component of how we are going to really expand our R&D base as far as the EV is concerned, and also to a great extent on the CV, on EV side. As far as capabilities are concerned, there are many areas where we are starting to develop these capabilities, whether it is in the area of, you know, battery pack, BMS, motor design, new architecture, especially the pure EV as we have shown in the concept Avinya.
As well as reprogramming the area of electrical architecture. There's a lot of collaboration work which will also happen with various startup companies, JLR. Capabilities will not be only limited to within Tata Motors, but also seeing the opportunities of synergies with JLR as well as some other Tata companies which have a lot of capability in the area of softwares. These are the areas where we are focusing on. As far as Avinya is concerned, what kind of voltage architecture. See, I would not like to preempt this at this stage when it is in the stage of concept development and engineering feasibility.
I would like to say that our choice of voltage architecture, which right now is in the range of 300-400 volt for Gen 1 and Gen 2, will depend on how the charging infra we are seeing going to pan out, at what voltage levels and the state of grid as far as India is concerned. Also more importantly, the choices that we have as far as aggregates and subsystems are concerned for different voltage levels. We are definitely seeing trend in luxury segments globally where it is going to 800 volt. Right now in India, we see for quite some time that this will be in the zone of 300-400, where we get the sweet spot.
Right now, as far as O&E is concerned, I'm not confirming that it is going to 300-400 volt, but these are the considerations that we are taking into account.
Thanks, Shailesh. Thierry, do you wanna give it to
Great answer from Shailesh. I would maybe just complement with an angle, which is the one double angle. The one first of the incredible change in the value chain of this e-mobility, you know, compared to the previous ones, of course. Why? Because we need to really master some control points. You mentioned the cells, Balaji. We could mention the EDU, we could mention the inverter, we could mention the semiconductors, the strategic semiconductors, which are part of this new value chain. It's clear that mastering, controlling that value chain, which is not excluding from partnership, is absolutely critical in order to manage not only the technological superiority, but also, and even ultimately, the customer satisfaction and its delight. That's what is driving us. We are, of course, upskilling the people.
That's no doubt. We are hiring and we are partnering in order to make it such that we are at the utmost level on these topics. It is absolutely true that the second point in my view is that the way we can enhance and embrace the full ecosystem, which goes along with e-mobility, with the technological advanced capabilities that we have in order to manage not only the product, but also the services. Also the seamless experience, for example, when you are charging. All that is very much part of everything we can share with the Tata Group. One of the key point being, of course, software, as you have rightly mentioned, Shailesh.
Thank you. I think with this we come to the end of the questions that are there. I think the rest of the questions are basically a reframe of the earlier questions. We believe we have answered everything, but if in any case you believe that you would love to take a clarification on something else, feel free to reach out to our investor relations team, and we'll be more than happy to address you on that one. Thanks a lot for attending the session. Thanks, gentlemen, for also your candid answers. See you soon. Best wishes, everybody. Thank you.
Thank you.