The passage of GST means free flow of goods from any part of the country to any other part of the country. Trucks will no longer have to stop for hours together to get a permit, and can actually be driven for 15-16 hours a day.
The typical truck in India is driven only for 8-10 hours a day, and the remaining time it is stuck for various issues - maintenance, break down, and the notorious delays at state borders and check points for getting "clearance".
This means that there has been a tremendous disincentive to actually upgrade trucks in India. If a truck is not going to run much anyway, why would you want to pay the capital costs of changing that to a new truck?
In fact, most of the trucks that are on the highways today would be hardpressed to be operated for 15-16 hours!
Once GST comes in, we could see shifts in behavior, with 2 drivers in a truck, and some trucks even being operated without much breaks for 20-22 hours a day! The speed to market and the flexibility that this allows will more than pay for the cost of the additional driver.
Tata Motors, being the largest player in the Commercial Vehicles segment will see the biggest boost to demand from this change in behavior.
The passenger vehicles division of Tata Motors will also benefit because of lower excise duty. Tata Motors is the largest seller of small diesel cars in India, and they will be the biggest beneficiary of the drop in Excise duty. This will allow them to make the switch to clean diesel engines without increasing cost of the vehicle, thus solving the environmental impact issue as well.
The best part is, the stars seem to be aligning for Tata Motors in a powerful way. Brexit was initially seen as a major negative for the JLR division of Tata Motors, but gradually opinion is shifting that this could be a major positive for Tata Motors.
Tatas will benefit out of Pound Depreciation, which will allow them to sell British manufactured cars cheaper in other countries. Secondly, initially people thought that JLR would lose access to Europe, and therefore lose its biggest market. As it turns around, European car makers sell FIVE times as many luxury cars in Britain, as JLR sells WORLDWIDE! So if there is any loss of market access, it will actually hurt European car makers more! JLR might see better domestic sales within the UK, as Audi, BMW, Mercedes, Ferrari, Lamborghini and other luxury brands in Europe find it tougher to sell in the UK! It is highly unlikely that Europe will shoot itself in the foot and deny access to JLR, because if they do, UK will also deny access to European car makers into Britain!
JLR turnaround has more or less completed, and it has been seeing phenomenal sales increases. What started with the Landrover Evoque has continued into other models.
In coming years, Tatas will also benefit from JLR quality percolating to other parts of the company, as well as frugal engineering pioneered by Tatas helping JLR lower costs. These are powerful drivers to make Tata Motors into a multi-bagger.
Tata Motors is available at just over 10x PE Ratio if you buy the DVR shares, which also have a better dividend. Considering that Tatas are the only player to operate in Commercial and Passenger segments, they are positioned to benefit the most from the current scenario.
The typical truck in India is driven only for 8-10 hours a day, and the remaining time it is stuck for various issues - maintenance, break down, and the notorious delays at state borders and check points for getting "clearance".
This means that there has been a tremendous disincentive to actually upgrade trucks in India. If a truck is not going to run much anyway, why would you want to pay the capital costs of changing that to a new truck?
In fact, most of the trucks that are on the highways today would be hardpressed to be operated for 15-16 hours!
Once GST comes in, we could see shifts in behavior, with 2 drivers in a truck, and some trucks even being operated without much breaks for 20-22 hours a day! The speed to market and the flexibility that this allows will more than pay for the cost of the additional driver.
Tata Motors, being the largest player in the Commercial Vehicles segment will see the biggest boost to demand from this change in behavior.
The passenger vehicles division of Tata Motors will also benefit because of lower excise duty. Tata Motors is the largest seller of small diesel cars in India, and they will be the biggest beneficiary of the drop in Excise duty. This will allow them to make the switch to clean diesel engines without increasing cost of the vehicle, thus solving the environmental impact issue as well.
The best part is, the stars seem to be aligning for Tata Motors in a powerful way. Brexit was initially seen as a major negative for the JLR division of Tata Motors, but gradually opinion is shifting that this could be a major positive for Tata Motors.
Tatas will benefit out of Pound Depreciation, which will allow them to sell British manufactured cars cheaper in other countries. Secondly, initially people thought that JLR would lose access to Europe, and therefore lose its biggest market. As it turns around, European car makers sell FIVE times as many luxury cars in Britain, as JLR sells WORLDWIDE! So if there is any loss of market access, it will actually hurt European car makers more! JLR might see better domestic sales within the UK, as Audi, BMW, Mercedes, Ferrari, Lamborghini and other luxury brands in Europe find it tougher to sell in the UK! It is highly unlikely that Europe will shoot itself in the foot and deny access to JLR, because if they do, UK will also deny access to European car makers into Britain!
JLR turnaround has more or less completed, and it has been seeing phenomenal sales increases. What started with the Landrover Evoque has continued into other models.
In coming years, Tatas will also benefit from JLR quality percolating to other parts of the company, as well as frugal engineering pioneered by Tatas helping JLR lower costs. These are powerful drivers to make Tata Motors into a multi-bagger.
Tata Motors is available at just over 10x PE Ratio if you buy the DVR shares, which also have a better dividend. Considering that Tatas are the only player to operate in Commercial and Passenger segments, they are positioned to benefit the most from the current scenario.
