P.B. Balaji: Yes, thank you. Adrian, this is coming your way this is from Jinesh Gandhi yes in terms of JLR, you’ve talked about higher inflation and supplier claims largely related to constrained volumes. Can you talk about the quantum of these two, till what production level would you have to compensate vendors and the still – related question also chip related cost inflation is expected to start moderating in CY 2023 as supplies improve? Is that a fair assessment? And you also talked about increased SG&A spend. What are the targeted levels to which you want to increase SG&A spend so maybe three distinct questions there?
Adrian Mardell: Yes okay, so let me talk them in order of they were asked, so look the inflation claims and the reason for supply claims. There is, multiple reasons below that and in terms of the level that we expect to be normal. If you go back to FY ’21 and – on previous calls, I’ve referred to FY ’21 a lot before supply constraint. A normal level for us, we still believe will be the 120,000 units, plus a quarter 40,000 plus a month 500,000 a year. And once we get towards that level will be clear how much more we can push it beyond that. So for a normal environment and our suppliers set up for normal environment. We would need to build wholesale 40,000 plus units a month, and we’re just above 26,000, 27,000 at the moment. So there’s a long way from today to normal, but we do believe that increasingly quarter-over-quarter.
We will in calendar year 2023 move towards that normal level until we get 40,000 to that level. A number of the reasons for the claims in particular, the utilization of supplier factories which are within this number will still be there. Once we get to that level, if we have no unnatural requirement to go buy parts outside of normal channels that’s eliminated then again we will eliminate another course scored in our premium parts or chip supply from – the vendors, the brokers that will be eliminated as well. However, we will still be left with commodity prices at the moment, they are looking to be heading more aggressive against us and they will still be there and a lot of our contracts with suppliers have a pass-through on commodity costs.
So there will be some level, that’s the only problem we have. We’ll probably, won’t be talking about it by the way, but it’s wrapped up within that 200 plus million a month, including some more on utilities lower than it was and including the wage the wage demands that, which hopefully will come down with the interest rate pressures that going to be pull out.0 From an SG&A perspective, we will increase spend, but revenue will increase as well. So think about SG&A increasing commensurate with improvements in revenue. It’s just about 9% of revenue today, maybe a – shade, over think about that being a broad guideline going forward on SG&A. So we won’t be spending above our entitlement to spend, but as revenue grows, we’ll need to stimulate some of that demand both of those datasets would increase.
P.B. Balaji: Thank you. I understand some of my questions are – it’s a bit muffled I’ll try – my level best to increase my volume. Next question comes from Rakesh Kumar, Adrian, back to you again with PHEV incentives coming down in Europe, do you see risk to JLR compliance with CAFE targets and given the JLR’s FCF generation in third quarter and seasonally strong fourth quarter is there FCF breakeven outlook for FY ’23 conservatives and I’ll separately, pick up the – Tata’s battery manufacturing plants in Europe?
Adrian Mardell: Yes, okay so if I take the PHEV one before. Look, we’ve been very consistent on PHEV volumes over the last several quarters around 11%. We obviously monitor this really carefully, when I look at the order bank that we’ve referenced the PHEV orders now – order bank actually slightly richer than that at the moment, so up to 14%. So there is no indication at this point in time that any customer incentive changes on PHEV as having a sizable impact on the orders that we actually receive nothing at this point in time. So I’d say what we see today no, to the first one. There is no impact on PHEVs. We don’t expect to be non-compliant in Europe over this next phase either. The strong JLR cash flow in the third quarter.
I think if we go back to the page that we talked to earlier, we are expecting a strong cash flow in quarter four. The underlying cash should be broadly at the level that we saw in Q3 maybe around the £200 million. I’m hopeful cash from operations will increase a bit with the increased volume. Our investments are going to increase as well as we’ve said. So maybe those two will balance out. We’re only three weeks through the quarter. There’s 10 weeks to go on the supply obviously still be in fragile things can change. But that’s what I see today broadly speaking, underlying cash been similar if not a shade higher in Q4 over Q3. So working capital was a big build back this quarter £300 million that probably is going to fall a little. It really depends on how many units we actually built in the March, the mid-February through end of March period, but it’s likely to be less than the £306 million.
So we see – in total of the total cash to be slightly lower in Q4 even though the volumes are higher because that working capital point. But we do believe that’s going to drive us through breakeven maybe up to £100 million in total for the full year.
P.B. Balaji: Thanks, Adrian. On the battery plants for Tata’s in Europe, I think as we had mentioned earlier as well, this will be a Tata Sons entity that we’re investing where you have JLR and Tata Motors as two anchor customers and locations, India, and Europe. Obviously at this point in time – this is all that I can share. And as and when we are ready to announce more, we will talk about that? Okay, this question is actually coming on popular demand and therefore, Shailesh is coming your way. Considering the strong EV order book, what is the rationale for the price cut in Nexon variant that we saw two, three days back? And what’s your take on the brand impact for the price cut? And is it supported by cost reductions? Multiple people have asked it in different ways, but this question is non-stop. Over to you.
Shailesh Chandra: So the call on price cut has been taken after €“ holistic, consideration taken into account multiple factors. One is that we have a future growth aspiration as far as Nexon EV is concerned and with the improving capacity and supply, I think this was one be consideration. Also the visibility of underlying structural costs and in which we have been able to reduce over the last two to three years effort of the deeper localization that we have been working on. There is also an added factor of – depending PLI benefits also that we look relative price positioning of our entire EV portfolio and mostly importantly, keeping the value proposition fiercely strong in the changing competitive landscape. So these were the four, five factors I would say that has really gone behind this.
As far as brand is concerned, I think Nexon brand enjoys a very strong referral from its large customer base of 40,000 plus now. And in terms of its value proposition, it is the best in terms of compelling mix of our best tech features, premium and cable experience, multiple range options. I think the revised pricing action with improved range only makes it higher on consideration and more desirable for our customers, so I think this is the thought which is gone behind this.
P.B. Balaji: Yes thanks, Shailesh. There is question on ADRs, which I thought we expect, but if I just pick it up, why did Tata Motor decide to delist ADRs, is the cost of complying versus pressure on shares on account of shareholders who don’t want to invest directly in India, management thoughts. We had explained that the original purpose with which ADRs were listed, I think is probably now not relevant anymore. And with the Indian market getting deeper and wider, there is no constraint on fund, raise and also all our bond issuances anyway we don’t need the ADRs to be listed there to do that. And at the same time compliances are getting more complicated and therefore, we just decide – the risk reward equation one looked at it then make sense for us to continue as part of simplification, we have not all that’s the background to it.
They stand delisted as of yesterday. What is now the net auto debt deleveraging timeline for Tata Motors? I thought I already covered it. Maybe I’ll just talk about the second line. How does the listing of Tata Technologies help towards that, we have announced our intention. It’s now our Tata Technologies Board position and therefore we will be working with them closely. Question from Gunjan. Could you talk about the impact of RD for both CV and PV, I think what Girish have already covered that piece. Also an update on the discounting trends in CV industry, update on the Tiago EV order book Shailesh and we already talked about the price cut in Nexon. Why don’t you finish that and then I’ll go to JLR on the VME trend?
Girish Wagh: Yes, so I think on the discounting as we have been speaking about it for the medium and heavies and intermediate and light commercial vehicles. We have started pulling back the discounts from the month of September and we see a good impact of that flowing into our results for Q3. And we will continue to be on this path even in Q4 to bring down the discount and also bring more transparency in the systems. As far as small commercial vehicles are concerned I think this discount reduction in Germany – we have started even earlier right from Q1 of this year. So we will continue that as well, and ensure that finally it – helps us build margins in each of the product mix. Shailesh?
Shailesh Chandra: As far as Tiago EV order book is concerned, I already mentioned that we crossed 20,000 which was the size which we had kept for the introductory price so that is the status as of now. As far as delivery is concerned, we started the deliveries – sorry we started the supplies I would say last month itself. And this month, we are ramping up and I think we have kept a target that we should always keep the waiting period within six months and that will be the intention. We have kept some level of fungibility between the electric vehicle models that we have. So we will be able to temporary ramp up to ensure that the waiting period is kept within a period which is acceptable to the customers.
