JLR to accelerate EV push, commits 15 billion pound investment over next five years!

What's Buzzing 

In a regulatory exchange filing, Tata Motors said its foreign subsidiary, JLR, is planning to invest £15 billion (~Rs 1.52 lakh crore) over the next five years amid accelerated push towards electrification in the luxury car segment globally. It plans to invest this sum in JLR’s industrial footprint, vehicle programmes, autonomous, AI and digital technologies and people skills. The company has also retained its reimagined strategy financial goals i.e. cash positive balance sheet by FY25 and double digit EBIT margin by FY26. 

Context 

Along with this investment, the company informed about its plans to convert its existing Halewood, UK facility into a fully electric production facility and its next generation mid-size SUVs to be based on new Electric Modular Architecture (EMA) while continuing its existing flexible Modular Longitudinal Architecture (MLA), which can support ICE, hybrid and BEV powertrains. It also plans to open pre-bookings for first all-electric Range Rover later this year (likely launch in 2025) while the first of three reimagined modern luxury electric Jaguars will be a four-door GT (range at ~700 km, indicative pricing at £1,00,000) built in Solihull, UK. 

Our Perspective 

The capex committed by JLR over the next five years i.e. £3 billion per year is on the higher side amid its usual capex trend of £2-2.5 billion per year. However, with the company retaining its financial goals i.e. cash positive balance sheet by FY25 (existing net debt at ~ £3 billion as of FY23 end) and double digit EBIT margin by FY26, makes us believe that volumes at the company and margin profile will substantially improve, going forward (FY24-25). This, coupled with its actions on value unlocking at its Indian EV arm as well as Tata Technologies’ stake makes us positive on the stock. Domestically, in the electric passenger vehicle segment, the company is currently dominating the space with massive 80%+ market share and absolute volumes crossing the 50,000 mark in FY23 and is well poised to attain its target of ~1 lakh unit sales volume in FY24E.