Tata Motors' Demerger and Sales Challenges: What's Ahead for FY26?

Key Highlights:

• Tata Motors’ demerger is on track, with shareholder approval and NCLT decision expected by Q2FY26.
• Internal work, including employee assignments and IT upgrades, is complete.
• Tata Motors expects growth in the PV and CV segments in FY26.
• The US-UK trade deal lowers JLR’s import tariffs, but higher rates push cost control efforts.
• PV and CV sales drop in FY25, especially in EVs.

Tata Motors Ltd. is moving ahead with its plan to divide its automotive business into two separate listed companies. The process is going smoothly and is on schedule. P. B. Balaji, the Group Chief Financial Officer, confirmed that the split is going as planned. On May 6th, most of the company’s shareholders voted in favour of the proposal, showing strong support.

Shareholders’ Approval and Legal Process

Now that shareholders have given their approval, the next step is to take the proposal back to the National Company Law Tribunal (NCLT). A decision from the NCLT is likely to come between July and August, which falls in the second quarter of the 2025-26 financial year (Q2FY26). Tata Motors is aiming for July 1st as the official start date for the demerger process, with the split expected to take full effect by October 1st.

In simple accounting terms, the appointed date is a set date mentioned in the demerger plan. From this date, the split is considered to have started for accounting and business purposes between the two companies. On the other hand, the effective date is the actual date when the demerger becomes legally valid and officially takes place.

Along with the external approval process, Tata Motors is also making good progress internally. P. B. Balaji shared that the company has already completed assigning employees to their respective companies after the split. Work is also going on to update IT systems, including moving the commercial vehicle business to the new S4HANA system. Balaji added that the demerger will help both businesses work more freely and carry out their plans more effectively.

Tata Motors Ltd is hopeful about seeing stronger sales and profits from its passenger vehicle (PV) and commercial vehicle (CV) businesses in the financial year 2025-26 (FY26). However, the outlook for Jaguar Land Rover (JLR) remains uncertain due to ongoing changes in global trade tariffs.

Group CFO P. B. Balaji mentioned in a press conference that while they can share clearer forecasts for PV and CV, they are waiting for more details on international tariff policies before making predictions for JLR. Tata Motors has welcomed the recent trade deal between the US and the UK, which lowers the import tariff on UK-made vehicles entering the US from 27.5% to 10%, within a yearly limit of 100,000 vehicles. While this is a positive step, the new rate is still much higher than the earlier 2.5%. As a result, Jaguar Land Rover (JLR) is now focusing more on improving cost-efficiency to manage the impact.

Tata Motors expects to continue growing, supported by better fleet usage, steady market sentiment, and ongoing investments in infrastructure. P. B. Balaji shared that the company has crossed its double-digit EBITDA margin goal, reaching nearly 12%, and achieved a strong Return on Capital Employed (ROCE) of about 40%. He added that growth is likely to pick up in the current year after a slower FY25. The company is also getting ready for the smooth implementation of air-conditioning rules in trucks, adding more value to its vehicle range, and launching new models soon.

FY25 Sales Performance and Future Plans

In FY25, Tata Motors reported total passenger vehicle (PV) wholesales of 553,585 units, showing a 3% decline compared to the previous year. This drop was mainly due to a sharp 13% fall in electric vehicle (EV) demand, as increased competition and more choices affected sales. The company’s commercial vehicle (CV) sales also dipped by 5%, reaching 376,903 units for the year. In comparison, Jaguar Land Rover (JLR) sold 401,000 units in FY25, which remained flat compared to the previous year.

Also Read: Tata Motors Opens New Vehicle Scrapping Facility in Kolkata

CMV360 Says

Tata Motors is making progress with its demerger plan, which should allow both its passenger and commercial vehicle segments to operate more effectively. Although there are challenges, especially for Jaguar Land Rover because of tariff changes, Tata Motors' strong financial results and focus on cost efficiency point to a positive outlook for FY26.