Apologies for the delay. Welcome to Tata Motors Q1 FY 2023 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 Vehicles Limited and Tata Passenger Electric Mobility Limited, Mr. Adrian Mardell, CFO, Jaguar Land Rover, and my 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 the Teams platform, which is already open for you to submit your questions. You are requested to mention your name and the name of the organization you represent while submitting the questions. I now hand over to Balaji to begin the presentation.
Thank you. Firstly, thanks everybody for taking the time to join the session. As customary, we'll quickly cover the presentation slides, assuming that you have gone through it or have personally looked at it, and obviously spend as much time as possible on the Q&A. Starting with the safe harbor statement you're well aware of. Nothing new there. Just again, a reminder to everybody that the way the numbers are being presented is consolidated view downwards into TML Tata branded commercial vehicles anywhere in the world, Tata branded passenger vehicles anywhere in the world, Jaguar Land Rover vehicle financing. That's how the verticals are done. No change in that. Just a reminder. Thanks, Paul. Again, it's been another intense period for us both in TML and in JLR.
One of the key follow-up I would want to make is in terms of the incorporation of Smart City Mobility Solutions subsidiary for managing the GCC business of the Government of India and its state transport undertaking. Of course, the EV portfolio continues to expand with the launch of the Nexon EV Prime. JLR for the Defender 130 launch, we'll talk about later as it's come through this quarter. The Refocus continues to deliver results for us. The order bank grows to a new record of 200,000 units. Next slide, please. On the financials, let me start by putting it in context that it has been a disappointing quarter for us.
We are well aware of the numbers did not match our own expectations when we started the quarter. Yes, there is a fair amount of challenges on semiconductors and COVID-related lockdowns that we had to contend with. At the same time, the one that really caused us grief was the slower than expected ramp-up that we had in Range Rover and Range Rover Sport. I'm sure Thierry and Adrian are going to talk about it in the coming plan. As we end the quarter and we enter into Q2, we believe we are in a strong place, and therefore, are quite confident of how the current quarter is going to land up that is Q2. That's for the future, but let's quickly delve into Q1.
Growth of 48% in both sales and about 8% revenue growth. The PBT before exceptional item of about INR 100,500 crore in JLR on pension-related matters, which Adrian will talk about, is a INR 5,000 crore loss. EBITDA deteriorated by about 90 basis points year-on-year. EBIT percentage is about 60 basis points improvement compared to last year same time. It's something that could have been better. FCF on a outflow basis of about INR 9,800 crore, most of it is working capital, so not particularly worried about it. Next slide. Obviously, the numbers also got impacted by the revaluations of FX and commodity hedges in the highly volatile FX and commodity markets. Next slide. Source of growth.
If you look at it, we grew about 8% in revenue terms. Volume and price contributing roughly 50/50. Translation took away a lot of it, basically pound sterling depreciating a lot vis-à-vis the Indian rupee. Therefore, that's what you see as a 4.3% in the translation. The profitability improvement, most of the cylinders fired between CV, PV, and the others. Of course, JLR took down their profitability because of great challenges that they had, which I'm sure will turn around this quarter. Net automotive debt went up from INR 48,700 crores to about INR 60,700 crores. Almost entirely explained by working capital and about INR 2,000 crores of underlying external debt that is there to INR 34,800. That should reverse once the profitability improves.
With this, let me now hand it over to Adrian to take you into JLR in a bit of detail. Adrian?
Yeah, many thanks, Balaji. Next slide, please. Okay, so this is our 66 quadrant. As Balaji said, disappointing quarter for us in Q1. Retails were balanced the same. You know, so as you'll see in the presentation, we have no concerns about demand and retail levels at all. Revenue was down. Wholesale volumes were down 7%, and that's reflected in the revenue. But particularly because of the model changeover nameplates, Range Rover and Range Rover Sport in the quarter, we had a particularly weak mix within that revenue base. That really is the story for the losses that you see there, the GBP 500 million. The EBITDA, 6%, and the EBIT, -4% in the quarter. Free cash flow was -GBP 769 million.
That's not a number we're proud of, although it is the best quarter one result for five years, incredibly. We can do much, much better with that in Q2 and going forward. We're certain of that. Next slide. Okay, these are the key performance highlights. I've mentioned some of them. Order book, Balaji mentioned, up to 200,000 units. We will take you through that.
There is a pensions benefit for the reestablishment of our future pension liabilities at an inflation level of CPI rather than RPI. That's excluded from that loss before tax because it's non-EBIT related. Our Refocus program continues to go well. I will take you through that. Liquidity continues to be strong, GBP 3.7 billion cash on hand and a GBP 1.5 billion revolving credit facility from July 2022. Total liquidity, GBP 5 billion-plus. Next slide, please. Okay, so this is our retails and our wholesales in quarter one by brand. We've broken this out. We used to refer this to nameplate families. We're now referencing this as individual brands. Retails at the top there, you see, are flat, and they're pretty much flat across all of the brands. Obviously, that's retails are being fed from dealer inventory.
I do have an inventory slide later, and there's some things on there that hopefully you'll see as this starting to turn around for us. Wholesales, this really lands on the point about our Range Rover and our Range Rover Sport. You can see there in the Range Rover brand, wholesales are the lowest quarter-over-quarter versus last year. That's where we've fallen because we haven't been able to build up the production in that new facility. I'll talk to that later, as well, as fast as we would have wished. That's really the story behind the total wholesale reduction in the quarter. Defender was stronger than previous quarters and last year as that plant in Nitra is getting closer to a level of production than any other plant at the moment. Next slide, please.
This is the same data but it's now broken down by region, regional sales. Retail is again at the top. What you see here, which, you know, knowing our profile of what we sell where is corroboratory to the last page. You know, we've done weakest in our regions that are most reliant on our Range Rover and our Range Rover Sport because of our inability to ramp those products up at the speed we would have wished. North America is down significantly, heavy Range Rover, Range Rover Sport region. China is down heavy Range Rover, Range Rover Sport region, and also snippets of overseas. We've done better, actually, in the quarter in the regions that take the other products from other plants, i.e. SUV two and three in Europe and the U.K..
The wholesale data you see there as well, I won't go through that all in detail. It's a version of what I've said before. You see China down again because of that Range Rover, Range Rover Sport number set. Electrified data up 2% on previous quarter, now to 66%. The BEV and the PHEV data is down slightly, and that's because of the absence of the Range Rover, Range Rover Sport for PHEVs also. Next slide, please. Okay, so this is our walk from quarter one last year, and it's telling you what you should expect to see. The significant adverse is on both volumes, down 13,000 units, and mix. Within that mix, there's actually a negative of 170 for Range Rover, Range Rover Sport and 50 positive for Defender.
Our VME continues to be at historical lows, and the pricing actions we took earlier in the year are starting to come through. Inflationary pressures are similar to what we actually indicated in Q4. We continue to have bad news on capitalized engineering. Why? Because our new programs haven't yet come to maturation. We expect that to change as we go through the balance of this year. That's worth about 1.5 EBIT. Next. The bad news on revaluation because sterling fell to 1.21 at the end of the quarter. The bad news on commodities because actually commodity rates for aluminum and palladium, the ones we hedge most, actually also fell as we went through the quarter. Obviously, both of those two things are good news for our operating model.
You can see operational FX, particularly on the dollar, was good news in the quarter. Overall, that walked us from the -0.9% EBIT to the -4.4% EBIT. Again, this excludes the pension exceptional item, which I referenced earlier. Next slide, please. Cash, where are we on cash? GBP -769 million. Most of that, again, is working capital, but the constituents are slightly different. The inventory has actually increased, which obviously from a cash and a working capital perspective in quarter is bad news. From a starting to build back the health of the pipeline and starting to build back parts inventories, which of course will help with our build reassurance going forward, that's where that money is being consciously spent this quarter.
Underlying cash is actually GBP -150, and again, that points to the weakness in our sales profile, particular to Range Rover and Range Rover Sport. Next slide, please. Okay, our breakeven remains pretty much the same as it was last year on a full year basis, 80, 000-85,000 units in a given quarter. It was even though we had a weak profile of sales in quarter one, as I've explained already, that breakeven point was still 80,000 units. We actually did build more cars than we actually wholesaled, and I'll take you through that in a moment. We ended up by building our inventory, a work in progress by about 8,000 units, which we will complete in quarter two. So that breakeven, given the conditions we have, is still really, really low and really, really strong. Next slide, please.
This is the investment, a little bit lower than I was expecting by about GBP 50 million. You can see the point there. On the left-hand side, the amount of engineering expense we are capitalizing, it's only just over a quarter total engineering bill. In the previous year, you can see it was 40%. When we take our new Reimagine Architecture, CMA, and Panthera through their approval processes later in the quarter, stroke early next quarter, then that will start to lift to a normal level I've given you before, 50%-60%. That's worth 1.5% EBIT. Capital investment is lower. This time last year, we were finishing off our investments in our Solihull facility for MLA. Next slide, please. Okay. Again. Let's talk about where we were on supply and particularly on production in the quarter.
I'll give you a second to start reading that, but I'll hit the highlights. Look, we did have some chip supply constraints, particularly earlier in the quarter, but particularly, you know, relevant to the build-out of our old Range Rover Sport. That did delay the completion of the old Range Rover Sport. Many of those units we did actually need to build into WIP, which we're clearing through actually some of them this month in July. That did have an impact on the transfer of our labor into the new facility which builds the new Range Rover and the Range Rover Sport. There was an impact on semiconductors.
It was a particular supplier, and the work we've done with that particular supplier later in the quarter has meant we haven't had any further disturbance from that supply source right through to the shutdown period at the end of July. It shows the long-term contract work we are doing is actually starting to show benefits. We are seeing the light at the end of this very, very long tunnel here, particularly on semiconductors, we feel. The rest has been all about our ability to ramp up two new vehicles on an all-new architecture in an all-new trim and final facility with an all-new body shop and of course, you know, a workforce that needs training and an added shift, by the way.
We have added a third shift into that facility because of the huge demand that we have for these products within our order books. Those challenges are actually quite normal for a changeover point, but they have been exacerbated by the semiconductor shortage I mentioned earlier and also the COVID lockdowns in China, which did impact the ability for us to consistently build units, you know, week by week within that facility. A lot of that is starting now to become behind us. I've mentioned the partnership agreement with that key supplier, which has meant no shortages of semiconductors from that source for the rest of the quarter and through the first three weeks of July.
Our ramp-up is beginning, particularly on the Range Rover, which was the first vehicle, and our production on that vehicle doubled as we went through the quarter from just about 500 units a week to just over 1,000 units a week. We're starting to see that increased ramp-up speed on the Range Rover through to July. That increased again to about 1,300 a week. We really do feel we're breaking through on the Range Rover, and we now will go into that same process with the new Range Rover Sport, which may take a couple of months or so. We're also seeing reduced impact from COVID lockdowns in China as well.
Just the point around MLA, the production of the new Range Rover, the production of the new Range Rover Sport, the improvements we've made over the last six weeks, where we ended up in July in a much better place in April. Now, with what we see in front of us, we're now starting to see the capability to deliver 90,000 units to our dealers and importers in quarter two. A significant jump from that quarter one. Next slide, please. The orders have kept growing. In fact, they've grown in this quarter larger than any other quarter, marginally larger than the quarter when we announced and showed the Range Rover in October last year. We now got 200,000 customer orders. That excludes the dealer orders, of course.
You can see there our three latest and greatest product offerings, Range Rover, the Range Rover Sport at the bottom there, and the Defender making up almost 65% of that volume. They are our most valuable brands, our most valuable nameplates as well. We have a super healthy order bank, a super healthy future revenue stream, and we're starting to break through the production issues. There's starting to be light at the end of a very long tunnel on supply and semiconductors as well. A lot of that is not reflected in Q1. That's why we're really disappointed, and as you can probably hear from my voice, a tad frustrated about quarter one as well. We are starting to see those core ingredients move in our favor into quarter two. Next slide, please.
We've also revealed a new member of our Defender brand family, the Defender 130, the extension of the vehicle at the rear, beyond the rear wheels. This vehicle will safely and comfortably occupy eight adults. We expect it to be very, very popular in our U.S. and some Middle Eastern markets as well. If you did notice, even though the production at Nitra is closest to a normal level than any other plant, our demand and orders for Defender increased by 5,000-6,000 units in the quarter. A lot of that was for this vehicle. It's had an incredibly fast start and appeal, even though it was only revealed a month before the end of the quarter. Next slide, please. Okay, Refocus. Look, we did GBP 1.5 billion last year.
Even though it was a very thin transactional value quarter for us, we still did GBP 250 million in quarter one. That was broken down in three constituents. You've seen most of that data already earlier in the presentation. The net pricing value was GBP 120 million. That's a big constituent of it. We are starting to see labor and efficiency benefits within our agile transformation, particularly within the engineering fraternity. Obviously, we're doing that mostly to ensure that we speed up the quality maturation and the delivery of our products. But of course, you know, the unspoken within there is the cost of delivering them will be lower, also spending less time and less people hours on it. Then the investment number, which was low for the quarter, and therefore did contribute in this quarter.
I do expect that to be much, much less in later quarters, and I expect the other constituents to be greater. Next slide, please. Inflation. We'll be talking about inflation, I'm certain, for the next few quarters. Now, we introduced this slide earlier this year. It's the same slide on the left. GBP 12.5 billion cost base, variable cost base. Four significant elements within there, which are subject to high inflation levels, labor, commodity costs, semiconductor, conductor prices, and energy, of course. You know, the balance between the pressures have shifted a little bit. We went into the quarter with aluminum at $3,500 a ton. We've come out the quarter with $2,400. Palladium came down as well, $300. It shifted a little bit, temporarily perhaps, on commodities.
Of course, we're getting some utility, energy cost increases, semiconductor cost increases, and labor cost increases. The absolute number for the quarter versus last year was GBP 160 million greater. It's a little bit less than I was expecting actually in the quarter. I was expecting up to GBP 200 million. You know, and some of these headwinds are stronger and some of them are starting to alleviate. I think it's reasonable to assume we will have quarter-over-quarter data of this type of scale and size as we go through at least the next two quarters. Not certain about where we end up in Q4 yet.
Our Refocus program, we're very, very confident will more than offset. In fact, it did offset, even though not fully in EBIT, you know, the on costs in inflation as we go through FY 2023. I'll repeat two or three things here. One is we're very confident about the overall scale of the program and what we will do this year. We're confident that it will offset in total the absolute amount of inflation. As we go into the second half of the year, we expect an EBIT offset also, as most of the inflationary pressures we're seeing is then overtaken by the other things that we are doing, including the pricing actions which will come through later in the year. Next slide, please. This is an important slide, although it doesn't look it. Right.
This is the health of our end-to-end pipeline from build to shipping those vehicles. If I take you back to January 2021, we taught this two or three times before, but I wanted to talk specifically today. If I take you back to January 2021, that is close to a normal, healthy pre-semiconductor pipeline that we have. It increases and falls down because of the aberration called March in the U.K., where we build units and then we sell them. If you draw a line versus the first three months, you'll see pretty much 60,000 units in the dealer pipeline and 40,000 units in our pipeline. 100,000 total units would have been a pre-semiconductor normal environment. From there, our order bank is about twice of our dealer inventory. That's what we would have expected before semiconductors.
WIP's about 4,000 units. That's what that blue line left. The WIP is a subset of the gray line called JLR inventory. We own the WIP. We own the JLR inventory. That's on our balance sheet. That's a part of the GBP 3 billion that you would have seen if you look at the balance sheet. It really, really fell as we went through our quarter two. You will remember the quarter two. They both fell towards the 30,000 level from an inventory, a dealer inventory at JLR perspective. But our WIP also fell to about 2,000 units, right? We were building cars, but very, very few. We've gradually grown both of these over the course of the last three quarters, excuse me, through to June. There's been a significant uptick, as you can see there, in June.
What that means is we are releasing more cars into the dealer network, and we are releasing more cars onto transporters, onto trains, and onto ships. They will turn into retails and wholesales at some point. We do believe a part of that uplift is gonna happen in quarter two. We did end up with 10,000 cars in work in progress at the end of June. 5,000 of those were Range Rovers and Range Rover Sport. I'm simply giving you more corroborating evidence to the real breakthrough here is in that facility at Solihull, Range Rover, Range Rover Sport. That should have been 1,000, not 5,000. We're starting to work that number down, including during our shutdown period this week and next week.
We have high confidence those units will also be released onto those transporters, ships and trains as we go through August and into September. We are a long, long way away from being normal here, but this is evidence that it's starting to shift back towards a more normal environment, which underpins our 90,000-unit projection for Q2. Next slide, please. What are the things that are in front of us? I've said them a few times already, right? We absolutely need to continue to make progress in our new facility at Solihull. We're very, very confident we're doing that on Range Rover. We can then repeat that product of the same architecture, don't forget, in Range Rover Sport later in quarter two.
Our guidance is circa 90,000 units I've mentioned a number of times, but very confident Refocus will be GBP 1 billion. There is a plus there, by the way. I'll be more informative about how much of a plus when we talk in November. Our full year guidance is still 5% and GBP 1 billion positive cash flow, despite the disappointing and frustrating quarter one. That does mean we need to break through in quarter two, and delivering 90,000 units would be a sufficient breakthrough to underpin that number. We will then need to break through again in quarter three, and that's where the Range Rover Sport will come through strongly for us, we do believe. Our longer term targets, of course, on Reimagine, we rarely talk about these, right? Please don't think because we're not talking about them, we're not doing them.
We absolutely are doing them. 90% of our engineering teams are on Reimagine programs now, and those engineers were released from Range Rover, Range Rover Sport, which is why the capitalization is so low at the moment. Overwhelmingly, the focus and attention of our workforce is on future product. We now have a much more concentrated, determined, full-time response to the daily activity, which you're starting to see us break through on. That has been added to again during quarter one because of the challenges we had in quarter one. Free cash flow. Look, I'm not walking away from the net debt number in FY 2024. We have to break through in quarter two. We are running out of time. We just have 21 months, and that means from the end of June, that's an average GBP 200 million positive cash each month.
This is still possible, but we need to break through with speed. You know, the confidence when we do break through will underpin FY 2024, 7%+, EBIT. Obviously, at that point, we'll be in a really nice place to talk to you about how we're gonna walk to 10%+. Next slide, please. To P.B. Balaji.
To the numbers here. On the market share side, we had, we clocked up 42.5% for the quarter. The key call-out here is the shift away. More than a shift away, the more a shift towards the demand pull supply chain to ensure that the market share gains are sustainable. Focusing squarely on how we are working with the registration market shares rather than wholesale-led market shares. This is something that we are committed to, and therefore this noise in terms of market share for a quarter or two will be there. It'll then get us into a more sustainable pathway of simultaneous market share gains, optimal inventories at the dealers, and of course, lower levels of VMEs that we need to put in place. That's the emphasis there.
I'm sure Girish should want to talk about it subsequently. Next slide, please. The key call-out in this slide is the mix that you see of powertrains. We would want to watch the ILCV space carefully, because we did notice the reduction in the CNG composition. Believe it is noise, temporary noise as the prices of CNG versus diesel arbitrage came down a bit. Let's watch it for a few more quarters before we can take any message out of it. Next slide. Overall numbers, CV turned in a positive PBT for the quarter. On a year-on-year basis, revenue grew 107%. Obviously, this being a weaker quarter, you did see a sequential drop in terms of revenues.
EBITDA at about 5.5% and an EBIT of 2.8%. We expect this is something that's now starting to stabilize, and we'll be able to build from here on as the commodities come off. That is the thing on CV going forward. In terms of the walk, the P&L walk, you'll notice that we are stepping up FME in line with our plan to move to a more pull-based supply chain, so therefore working on retail-led. Employee cost of 200 people is basically just the beginning of the year when the numbers reset, bonuses for the year, et cetera. What you see is some unrealized FX and commodity hedges.
We did lose on the rupee depreciation because the hedges on the exports did lose money. This, in turn, get compensated by the dividend income coming into our account. Overall, that pieces the numbers balance each other out. The other call-out I would definitely say is look at the line between realizations versus variable costs. This number, if you recollect, used to be as high as 540 basis points. Most of the pricing actions have gone through realization to offset the commodity costs have gone through. Therefore, we should start seeing this starting to improve here on. Next slide.
Yeah. Thanks, Balaji. Some of the highlights for the quarter. I think the industry continued good recovery and doubled the volume over the Q1 of last year. Of course, the last Q1 was marred by the pandemic second wave. Nevertheless, I think good growth shown in Q1. The EBIT margin improved by 690 basis points, driven by the revenue growth as also the pricing and cost actions that we have taken, and has also grown 240 basis points over FY 2022 full year. We continue to see a very good growth in our spares and service penetration, thereby improving the non-vehicle business revenue by 75% over Q1 of last year. This is, of course, a good profitable stream for us. On new products we continue to launch.
15 new products were launched along with 25 variants. As all of you know, we also launched the Ace Electric Vehicle in the quarter gone by. Some of the bright spots, we've seen that trucker sentiment index, which we track every quarter, is now almost at a two-year high in MHCVs and intermediate and light commercial vehicles. Of course, this survey was done just before the first interest rate hike was announced. We are keeping a track of this. There has been some softening of the sentiment after that, but I think overall it remains very, very positive. On the commodity side, commodities did show some hardening up during the beginning of the quarter, but towards the end, I think we are seeing signs of softening after a good upward run since second half of last year.
Coming to the passenger segment, finally, we are seeing return of demand. With the staff movement, that is employee transportation to offices and factories back in place, as also tours and travel and specifically opening of schools, has led to good demand. The volumes grew by 60% over Q4 of last year, which is just the quarter gone by. Almost four times that of what we had seen in the first quarter of last year. Very good demand coming back. Although this is still lower than the highs which were achieved in FY 2019. Balaji spoke about the retail push that we have initiated, and happy to tell you that we had the highest retails in small commercial vehicle and pickup in Q1 of any year for almost last 10 years.
Going ahead, some of the focus areas. I think our international markets demand has been impacted, especially in SAARC as well as Sub-Saharan Africa, essentially due to steep depreciation in the local currency, along with fuel price hike and of course Sri Lanka, all of us know about the political turmoil. In these circumstances, we are looking at alternate markets and products to see how we can get back to the required level of volumes for international business. I spoke about the retail acceleration and lot of demand pull to ensure that we actually have sustainable gains going ahead, sustainable share gains. There's a lot of push on the digital lead generation.
Happy to tell you that 20% of our volumes are now coming from leads coming from digital in small commercial vehicle and pickup. With the interest rates increasing, I think we've continued our engagement with the key financials and trying to find out ways and means to see how we can support the customers in this environment. We started the margin improvement journey towards the second half of last year. We continue to do that and is being driven by both pricing actions as well as the cost savings. The fundamental margin has improved quarter-on-quarter from Q4 to Q1. Next slide. Update on the new businesses on electric mobility. Happy to inform you that additionally 100 electric buses were delivered in Q1.
Now we have cumulative 715 electric buses running on Indian roads and cumulative coverage of more than 40 million km. That's a good experience that we have and over multiple cities in the country. We are also working on the fuel cell electric bus, as we've been mentioning, and the program is on track. In fact, we had first milestone review with IOCL, with whom we are working jointly. This milestone has been completed successfully and both the partners were quite happy with the progress. We did foray into the last mile e-mobility on cargo side with the launch of Ace. We have memorandum of understanding for now 39,000 units. We already started customer trials, and towards the end of this quarter we will also start delivery of products.
Going ahead, we also incorporated the TML Smart City Mobility Solutions Limited as a subsidiary and operationalized 53 buses in Delhi Transport Corporation. As a part of the Smart City Mobility Solutions, which is the gross cost contract model or own and operate model, we are now managing 450 buses, more than 450 buses, and delivering more than 96% uptime. All of you know, we were declared L1 for the largest global tender of more than 5,000 e-buses. Now we have received LOA, that is letter of allocation, from Delhi Transport Corporation amongst these 5,000 buses for around 1,500. We are engaging with the rest of the cities and their transport undertakings with LOAs for their share as well.
The revenue which this business has generated in quarter one is around INR 145 crores, and we are on track in terms of the revenue trajectory. On the digital businesses, Fleet Edge, we are focusing on increasing adoption and active usage, so we have more than 235,000 vehicles now, amounting to 100,000 customers who are already onboarded. We are now initiating the minimum viable product two of our Fleet Edge is already being piloted with few customers. It will be launched in next month. This will enhance the user experience further. This is based on the experience expectations that we have captured from the customers.
Finally, our digital storefront for spare parts, called as e-Dukaan, is doing pretty well, continues to grow, and has grown 26% in revenue over quarter four of last year. That's in summary of about the new businesses. Back to you, Balaji.
Thank you, Girish. Just moving on to the passenger vehicle business. Call out on this slide is fundamentally around the powertrain mix. What's the CNG numbers now increasing to 11%. EVs continue to grow strong at 7%. Next slide. Market share of 12.3%, and the EV market share continues strong at 88%. Next slide. From an overall financial perspective, we continue to do well on the improvements in profitability that we are putting through. Business is now on a PBT breakeven after a long time. EBITDA at 200 basis points and EBIT margin of 72 basis points there going strong and likely to improve further. Obviously, on a year-on-year basis, one of the things to watch out for is the sequential FME phasing IPL came in this quarter.
That's a bit of a phasing issue that impacted sequential margins, but that's something that should take care of itself. Next slide. Overall, financials, both volume, mix, and realization is coming through strong. Still about 30-odd basis points of variable cost realization to be made up as we go forward. Step up FME is strong and will likely to step up even further as we go forward. Overall, commodity hedges did cause a bit of grief, and that's flowing through the P&L that you see there. Next slide. Shailesh.
Thank you, Balaji. Let me start with the Q1 industry highlights. In Q1, the industry wholesale increased by 41% year-on-year as the semiconductor supplies improved. The quarter sales were quite healthy at nine lakh in the quarter. Segmental shift towards SUV further strengthened. It was at 40%. Manufacturers continued to lose further share from 37%- 34% the last year. As far as Tata Motors is concerned, we continue to strengthen our market share, and we are maintaining the strength of year quarter on quarter growth market share. While the PV, ICE business grew by 102%, the EV business grew by nearly 5.4 times. The wholesale and production milestones, we crossed the milestone of 133.
In the last month of the quarter, we also crossed one of the major milestone of a monthly sale of 45,000. As far as EVs are concerned, we posted the highest ever EV sales of 9,300 units. This was despite the stress that we faced on semiconductors in the first half of the quarter. Market share remained strong at 88%. Last several months now, we continue to be the number one SUV manufacturer. That was the case in Q1 of FY 2023. Nexon has been trending at relevance in SUV in my trade 46 SUVs that we have in the market.
To further strengthen our supply side, we have signed a Tripartite MoU with the Government of Gujarat for Tata Motors for the potential acquisition of the Ford Sanand that are being discussed and very soon we will be moving further. Going forward, as far as industry is concerned, we clearly see that for this financial year, industry will grow to nearly INR 3.5 million. EV demand is going to continue to remain strong with a continued positive word of mouth of nearly 40,000 EV customers that we have today. As far as Tata Motors is concerned, at the start of the Q2, we have a very robust booking pipeline and low channel inventory which bodes well for quarter three. Demand for SUVs remains strong. We have a very strong booking pipeline here also.
There has been a good traction of CNG which continues. We expect the vehicle supply to improve with better semiconductor availability in quarter three. Rural demand is expected to be strong on the back of good monsoon. Next one, EV Max, which we launched in May, has seen tremendous response and has augmented the EV demand. Supplies are expected to improve in quarter three. Going forward, the challenges the way we see is that high inflation and interest rates may start impacting the auto demand, while there's no stress as far as people is concerned. In the festive season, we don't see a concern, although we also don't see a sign as far as the dampening of demand is concerned.
Given how the retail industry is getting impacted because of these factors, we have to be a bit watchful. Post the festive season, we will take stock of how the industry demand sustains. As far as Tata Motors is concerned, we remain focused on demand generation activities, with now a segment level and micro market level focus. We continue to enhance the supplies further with, as the semiconductor availability also improves and we pass on the cost reduction effort into that. Back to you, Balaji.
Thank you, Shailesh. Moving quickly on to the cash flows slide. Already let's skip that. Go straight into Tata Motors Finance. Go to the next one. Yeah. So here, call-outs here. Collection efficiency starting to improve now at 98% for June, and therefore GNPA will keep improving with every passing quarter. Fully compliant with all the new PCA norms that RBI has put in place, and both capital adequacy and liquidity remains comfortable. The aspiration is to take that ROE from 5.1% all the way up to double digit in the foreseeable future. Next slide. Coming on to the outlook, key call-outs. Demand remains strong and we expect it to remain strong despite inflation and geopolitical situation.
Obviously, need to watch the Indian CV situation carefully, but right now we don't see any cause for concern at this point in time. Chip supply is expected to improve further from Q2, and therefore cooling commodity prices that should also help in underlying margins. Therefore, we do aim to deliver the strong improvement in EBIT and free cash flows from Q2 onwards. One of the key things in this is what Adrian talked extensively about is JLR delivering on 90,000 on this side, continuing to improve market shares while restoring double-digit EBITDA margin will be the key imperative for PV, for CV. Of course PV, keep the show going and accelerate as much as possible. That's in a broad nutshell what we are working on. Happy to take any questions that you may have.
I already see we have got 30-odd questions that have landed up already. Let me start. I think, Girish, the first one is coming your way.
Mm-hmm.
This is from Sonal Gupta, L&T Mutual Fund. MHCV market share is now down to 54.6% in Q1. Is there a level at which you expect this to stabilize? What are the risks that the commodity benefits are competed away in that CV business?
Commodity.
Benefits are given away in the CV business.
First of all, on the market share front. I think over the past four years, we have been consistently growing market share in MHCV. We've seen some softening happening in Q1, but we are determined to get this back. On the back of various actions that we have, both on the demand generation front as well as launch of new products, I think we should be getting it back. Certainly not satisfied at this level. As far as the commodities are concerned. Sorry, Balaji.
Commodity margins are likely to be given away due to intense competition.
I think we have a comprehensive margin improvement plan running, which is working on both the plans. That is how do we improve the realization basis, delivering more value to the customer. The second thing is how do we keep on shaving off cost. One of the cost benefits is, you know, the commodity reductions which are likely to happen. We see how it comes.
Also, Sonal, just to add to that point, if you recall, the outlook is specifically calling out and we reached double-digit EBITDA earlier, so that's clearly an imperative for this business. Okay, next slide. Next question from Dinesh Gandhi on JLR. Adrian, I think this is coming your way. How should we think about mix for JLR considering ramp-up and Range Rover, Range Rover Sport, Defender, but also chip supply is expected to improve. Could mix further deteriorate over first quarter levels? And the second question, do you expect strong and consistent increase in wholesales from second quarter from the 90,000 levels that we signaled? And lastly, in which line item does an effective valuation unrealized commodity hedges get reflected? Three questions.
Okay. Thanks, Balaji. You know, the mix was really weak in quarter one. Range Rover mix was about 8% of that 70,000 units. Our order bank is telling us that between Range Rover and Range Rover Sport, it's 40% of the order bank there. There's a significant improvement of mix that will happen once we start to overcome that, those issues we've referenced significantly in the quarterly results so far. I absolutely anticipate mix not only to improve in quarter two, but to continue improving through the balance of the year as those production challenges continue to reduce. Do I expect strong and consistent increase in wholesales from Q2? Look, I expect each quarter to be better than the quarter before. That's no different actually to what I've been saying for the last two to three quarters.
I did expect that in this quarter also, actually. If I were to put a number on the data last in March, that number would have been 70,000 high, rather than 70,000 mid, and the difference would have all been Range Rovers. That would have actually started to shape the quarter much closer to the level of EBIT/cash loss I was inferring on May 13th. I do expect each quarter to be better than the last. I can see the data for the first three weeks. We're now building consistently above 7,000 units a week. We're building consistently week on week on week. That will increase to the 8,000 units plus, which we will need in this quarter when we start building Range Rover Sports.
We haven't built Range Rover Sport for six to seven weeks, apart from a few units just in proof and trial. That will begin to happen post shutdown from the 8th of August. We're pretty confident actually with what we see in front of us, that the build will grow from 7,000-8,000 units a week. We have 11 production weeks in the quarter. That gets you close to the 90,000 units, and we have 10,000 units in WIP which will reduce, and therefore that's why we're saying we think the wholesale number will be 90,000 units. Which line item does FX revaluation? Well, it appears down the whole stub. It's significant on revenue, of course, as we bring all of the overseas revenues into sterling.
It's significant on cost of course, because so much of our cost base is sourced in overseas currencies, around 55%, a lot in euros. It's line by line. If you take marketing costs, then within the marketing costs, which are obviously in the other expenses, we add up all of the foreign currency pieces, and then we have a big line item in there which really covers, you know, our exchange losses. It's down the whole stub.
Thank you. Thanks, Adrian. Yep. Next question also from Dinesh Gandhi. So Shailesh, coming your way. What's our capacity utilization in the PV EV? What is the scope to increase capacity through debottlenecking?
You know, we are pretty much operating at full capacity in Ranjangaon and Pune. We have some headroom, as far as the Sanand plant is concerned. To further debottleneck our capacity, there are actually some plan and we see an additional possibility of 10%-15% further debottlenecking. That's as far as the capacity plan is concerned. As you know, we are further working on the roadmap with you.
Thanks, Shailesh. Girish, your way. Are you seeing persistence of demand from small fleet operators?
Few things I would like to say. First is the sentiment index that we measure is at a high and therefore that is an indication of the interest from both large as well as small fleet operators. Also, if you see the intermediate and light commercial vehicles as well as small commercial vehicles, generally the small or retail customers, single vehicle owners are the buyers for these vehicles. These segments have grown more than that of MHCV. Actually the small fleet owners, single vehicle owners are still in the market and not likely to see softening immediately.
The point on inflation, which I'll pick up, Dinesh Gandhi, they expect commodity savings to come in second quarter. We do see commodities starting to cool off and you should start seeing this coming from second half as the current hedges wear off, as well as some of the contract repricing in May start coming through. Let's see how it plays out. Next question is from Ronak Sagar, Systematix. Any specific headwinds on CV EBITDA margin as Q1 FY 2023 production was largely similar to Q4, coupled with softening RF?
Yeah. I think two points I would like to make. One is, of course, the scale impact. The revenue has actually gone down by 15% from Q4 to Q1. That is one of the reason. Second is that the MHCV volumes have come down by more than 20% from Q4 to Q1. This certainly has an impact on the margins. What I would like to say is on the back of the pricing and the cost reduction actions that we've taken, the fundamental contribution or underlying contribution margin has actually improved over Q4 of the last year.
Thanks, Shailesh. Thanks, Girish. Next question is to me actually. On India e-bus order wins, can you please take us through how the GCP order win will be accounted in the financials?
Okay, there are two things here. One is Tata Motors standalone, and then there's a subsidiary, Tata Motors Smart City Mobility Solutions Limited. So there'll be first be a sale happening from Tata Motors to Tata Motors standalone, to the Smart City Mobility Solution. This will be considered as a sale in the standalone books, but in the consolidated books, this will cancel each other out, so the revenue will not be recognized, number one. Number two, this asset continues to remain in the Smart City Mobility Solution books, and we will have.
The collections will happen over a period of time as this bus starts running, and therefore there'll be a revenue recognition happening in terms of rupees per kilometer, in terms of the number of kilometers that it traverses. That will be the Smart Mobility Solution books. Against this, the running cost, operating cost, et cetera, will be set off against. Over a period of time, once this particular, obviously, the next question that comes is, will you keep building assets in your books? The answer is yes. Over a period of time, once the collection history has been established, then you'll be able to take this asset off your books. You'll be able to sell down the asset. There are multiple options out there.
There are also other conversations we're having, happening with the government to find a way to actually repayment this at inception itself. Those you should start seeing some results of those deliberations in the coming year. Definitely before the next tender that comes out of the sites. But there's a lot of possibilities to how to actually lighten the balance sheet and reduce the collection risk and the solvency risk of the SPV. Okay.
Next question is from Prateek Khodiyar, Nippon India AMC. JLR has called out a production of close to 90K units. Is it fair to say that the visibility of build rate as guided in Q2 is very high? Prateek, Adrian has covered this elaborately, therefore I wouldn't want to repeat this.
If yes, can you highlight some of the reasons for the same, which he's already done so. On the India PV division, looks like the model cycle tailwind for us is over, although model refresh can be a lever. Is there a concern within the team that the market share loss might be a possibility going forward unless we start with a new model cycle? Shailesh?
Yeah. I think we are well aware of the intensifying competitive landscape in the country. Sustaining our share, I think we have two, three points here to share. One that, as you rightly mentioned, the cycle plan or the MCs and the refreshes is a cycle that we'll see in the next two to three years, starting next year. That should not only help us sustain but slightly grow our market share. Also right now, the share growth at which we are is further helping because we are still undersupplied on this kind of demand. The second major lever for us would be the powertrains. We have a unique position where we have all four powertrains, petrol, diesel, CNG as well as electric.
Therefore, we are at the sweet spot of the growth that we are going to see in the next few years, as far as CNGs and electric is concerned. That should give us with the current models and with the expansion that we are going to see in the EV and CNG space as far as electrification and adding more CNG models, we will witness a growth in this segment because of our unique position of having multi-powertrain option. Third is of course, we have to add new vehicles. There are certain gaps in our portfolio which we are going to fill in the coming years. One of them we have already shown to you, which is the concept Curvv, which we had revealed in April, which is going to come in.
While it is going to come with first as an EV, but it is also going to come with the ICE powertrains also. There will be additional input which we'll announce at the right time. Mix of all these actions is going to ensure that we continue to grow our market penetration.
Thanks, Shailesh. Next question also your way. What's your backup plan in case hybrids become effective in the India PV market?
As a company, see, we'll be closely watching how adoption of hybrid takes place. See one thing we are very clear that the long term key drivers of the auto industry as well as the governmental regulation and the issues that we have as far as auto industry is concerned with regards to environmental issues, EV is the long term play. Therefore, as a company, we are going to remain focused on EVs. Having said that, you know, in the later part of this decade, as the emission norms are going to become more stringent, there will be a degree of electrification that will require in the current ICE vehicles. Therefore, as an OEM, we need to have a
There's also a question on pricing. Can we launch EVs at prices similar to hybrids or a slight premium such that the value proposition from EVs can further improve vis-à-vis hybrid? Any thoughts?
I have no clue of the hybrid prices frankly, because we are going to now see few hybrid, strong hybrids I am seeing so far. There have been few, you know, mild hybrids or even lesser than mild hybrids. We'll see how the pricing pans out. As you have already seen that we have launched our EVs which are 20%-25% price which is at premium to the current petrol and diesel model, automatic model. It is already very competitive. I am sure that this pricing would be competitive to a hybrid option that is going to come in the market. Let's see, you know, the pricing when it gets announced and discussed.
Thank you. Next question is from Hitesh Goel, CLSA. How much is your steel contracts pricing in Q1 higher than spot price? And if you fix the steel cost at spot prices, shouldn't the margin be higher?
Girish, you wanna take that?
Generally our steel contracts are for a period of six months, but due to the recent volatility, we shifted to three months. We have been doing steel contracts on a quarterly basis. I can tell you that the spot prices are much more volatile and generally higher than the contracts that we have in the steel mills.
Thanks, Girish. Next question, JLR, Adrian, coming your way. Is it possible, Adrian, to sum up what was the margin pressure in Q1 that was one-off in nature?
Sorry, Balaji, carry on then.
No, carry on, Adrian.
Okay, thank you. Yeah. Look, we pointed towards this. It was particular around the Range Rover and Range Rover Sport facility. We only built and wholesaled 6,000 Range Rovers in the quarter. That's a significant diluting impact in the margin. I won't give you the data, but you know, your modeling should mostly point towards that data. Is it one-off in nature? Well, the binary impact of very low production on Range Rover and almost zero production on Range Rover Sport is absolutely, you know, binary impact quarter, which will progressively improve. Margins will increase as well. Carry on.
Yeah. The next question, I will skip the other one, the second one on product, which you've already covered extensively. Let's go to the one on hedges. When does the adverse impact of hedges start affecting operational numbers?
If I saw any effect in the operational numbers, Balaji, I think if you went back to our.
Yeah.
To our walk our EBIT walk and our profitability walk, you know, I think it would have said that the operational ex-exchange was 210, and the impact of those hedges was about 115 versus previous year. If I give you the rates, actually, you know, the effective rate in Q1 was about 128. Our hedges is in place going forward just over 130. So on a quarter-by-quarter basis, we have got hedges around the 130 going forward, but it's not too dissimilar to the effective rate in Q1.
Okay. One more. The next question is from Raghunandan N. L., Emkay Global. For India business, can you please indicate commodity impact in Q1? I've already called out more of the commodity impact. Look at the thing between pricing versus realization. Sorry, realization was a variable cost, and you will see about a 30-40 basis points still to be recovered. We believe this will come off as we go forward. As far as the e-buses, the company is on large orders. What kind of equity infusion is planned in the company that will own the e-buses and suppliers on a gross contract basis? Obviously, this will pan out over a period of time because the buses have to be delivered by 2024 onward.
There is a fair amount of time in front of us, and we'll do it on a sequential basis. We'll have to think through the equity and debt combination to get that right as well. Leave with us at an appropriate time. We'll share with you. This will not complicate the calculations on getting net debt free. You can rest easy on that. We still have to crack the fact that this is asset heavy and there's a lot of work underway to get that back. Girish , coming your way.
Yeah.
How do you see the MHCV industry outlook for this year?
Right. I think.
The share of CNG vehicles.
Yes. Let me take the first one on MHCV. I think this would be the fourth quarter when we've seen successive growth that has happened in MHCV. This is happening on the back of upfront infrastructure spending by the government using freight rates, fleet utilization. I think most of the things seem to be falling in place. As I mentioned in the presentation, I think we are keeping a watch on two monitorables. One is the fuel prices, and second is the interest rates, and see what kind of impact it will have. As of now, I think it appears that we will see a double-digit growth in MHCVs for the entire year.
As far as CNG vehicles are concerned, I think over the past three months, the competitiveness of CNG price has gone down significantly with respect to diesel, although the gap still remains. As a result, we've seen that the CNG salience, which used to be, you know, 40% in our ILCV portfolio, has already come down to around 20%, 25%-27%. This is something we will also keep a watch on how the relative pricing between diesel and CNG plays out. I think as a company, we are ready for switching the portfolio either between diesel and CNG and ensure that we ride the one which is required in the market.
Thank you, Girish . Adrian, this is coming your way. A slightly different question on the production point. Has there been any change in bookings or the cancellation rate at JLR as production rate of other pieces are rising ahead of us, particularly this quarter when you had a challenge? The next question I think you have covered is why the dealer inventory at JLR been rising for the last two quarters despite no real different order backlog. Any impact on the incremental demand due to the global economic growth concern.
Yeah. Okay, Balaji, let me take the first one. Look, when you study those order books, I think a couple of things are quite evident. The three nameplates, the newest product, including the Defender, of course. You know, the orders for those three nameplates just keep growing. There's several reasons for that. I mean, we're not building as many as we need to, of course. That's one piece of that. There aren't many on the road either. That means we anticipate that the orders for these three nameplates, particularly Range Rover, Range Rover Sport, will continue to grow and the risk of cancellation on those nameplates is very, very low. I think there is a disparity when you look at the other nameplates we have.
The orders for those other nameplates, if you notice that data, have stayed pretty flat over the last nine to 12 months, around 70,000 units in total. We haven't built to the level we can build there. I think it's pretty clear that once we can build all of the Range Rovers, Range Rover Sports, Defenders, Velar, Evoque, then, you know, once we go to a normal level of production, we will need to stimulate demand in some of these other nameplates. The lower transacting value nameplates, the SUV 2 and SUV 3 sectors, and also Jaguar sedans as well. We are months away from that, we feel. Any cancellations we're getting are more in those lower value transacting nameplates.
There may be a link to question three, which is there, which is a subset and a part of that, but that's unclear for us 'cause it isn't that substantial yet. I think your question two about why is dealer inventory been growing, just think of our global profile. As we build more Range Rovers and Range Rover Sports, and we have been. You know, I mentioned earlier about the slide, if you can visualize the slide about where do we actually sell those. We sell those mostly in. You know, markets which are far away, China, U.S. of A. Of course, we own that inventory until that inventory is passed through ports of entrance into those markets. You know, from dispatch from plants here in the UK right through to the point of receipt in Shanghai, receipt West.
East and West U.S. of A, that's on our inventory. It's actually evidence that those cars are on the way. That's why it's growing, and it will continue to grow beyond this point when we get back to a normalized level, perhaps another 5,000 or 6,000 units. It's actually a healthy sign, even though it may not look it when you read the cold data.
Thank you. Thanks, Adrian. Next question is from Pramod Kumar, UBS. Adrian, this is coming your way again. Can you indicate the transaction price for the new Range Rover versus the old Range Rover, given the significant upgrade to the model?
No, I can't. Look, you know, I think this real data will show itself in two to three quarters time. You know, we've only built 6,000 cars. We've got 67,000 orders, 80-odd thousand across the two, almost 90,000 orders. It will be a great question when we get to Q4. At this point in time, early orders, the richest value orders are the most complex and the most difficult to build, so they're some of the ones which are still sat in that work in progress. Any data I give you will be misleading. It's going to be bigger, right? You know it's going to be bigger. Those transacting prices are going to be bigger, and they're gonna be moving with close to zero VME.
They're gonna be a really rich, healthy part of our portfolio going forward.
Got it. We've talked about the macro, so I will skip that. Question coming your way, Shailesh, auto order backlog for India PV and EV segments.
Yeah.
PE, I wouldn't add. It's, there's no backlog there, but PEs are more relevant one.
Yes. We have a very strong order book, as I mentioned in my presentation also. It ranges, you know, on an average, it's about two and a half to three months of the average sales that we are doing right now. As far as the various models are concerned, for PEIs, it varies anywhere between four weeks to three months. For EVs, it is higher, especially for the Nexon EV Max, the average waiting period would be seven months and upwards.
Okay, the next question is from Kapil Singh, Nomura. You've talked about recession risk. Do we have order books demand? We've covered it. India PV, commodity we have talked about. I think, same with Gunjan. I think we've talked about all the points that she has raised, in that, CLSA funding, model share, powertrain mix. I think we've talked about everything. Just go down the list.
Question from Satyam Thakur, Credit Suisse. Given luxury, global luxury OEMs, including JLR, have seen GP per vehicle rise significantly over the last six to eight quarters, do you expect to use any benign commodity environment to internally boost unit profitability? Or do you see industry using lower cost environment ahead to help support demand amidst a global growth concern? Thierry, I think this is probably right up your alley.
GP per vehicle, to make sure I understand.
The gross profit per vehicle, given the contribution margins have gone up. With lower commodity costs coming in and more profits coming your way, do you expect to take it to the bottom line or do you expect to stimulate demand?
Well, what we can see at the moment is that in our segments, the supply is not at the right level compared to the demand. That's the first element that people needs to understand. We can see, as far as we are concerned, that the demand continues to increase despite we are increasing the pricing. Just because there is a scarcity in the market and because of the desirability of our products are such that there is a kind of magic happening here. Demand increase and pricing increase at the same time because it's clear that our profitability per car is also increasing and we do more than compensating inflationary impacts that we can see as well.
Thank you. Thanks, Thierry. I think we're probably arriving at the last question. This is from Priya Ranjan, HDFC AMC. Shailesh , this is your question. Does it make sense for the company to think of an ICE variant of Curvv when the entire taxation structure gives us too much leeway to price the vehicle within 500 km range at a similar price point?
Absolutely, it makes sense. That's the reason why we are making both ICE as well as EV. I think there's still going to be a significant difference between the EV as well as ICE. Because here the attempt is to keep the premium that we have been keeping on the EV versus ICE to increase the range, you know, as we are able to take the benefit of taxation, as you rightly mentioned. At the same time, take the benefit of any battery price reduction which might happen. Right now we are seeing a slight spike in short term. As it keeps on going down by the time we launch, we expect that we'll be able to deliver better range as compared to what the current EVs are.
Therefore, it makes sense, at different price points you trigger demand, for different customer segments. Of course, you know, there will be customers who are very, you know, touchy about certain powertrains. I think we would like to give all the options to our customers.
Thank you, Shailesh. With that, we come to the end of the Q&A session. I think first, once again, thanks for your time, all of you. Really appreciate it and also the probing questions. As we started off, we do end this quarter on a disappointing note, but, at the same time, a very clear plan of action and a pathway in front of us in terms of how to deliver the rest of the year in a very strong way. Therefore, quite committed to the numbers and the targets that we put ourselves and also deliver to our own expectations. Thank you, and speak to you in the next quarter in better times.