Tata Motors sold far more trucks, but its operating profit lagged sales again

Tata Motors, which makes trucks, buses and small pickups, sold far more of them in the September 2026 quarter, partly thanks to a large order of light trucks for Indonesia. Sales in the filed consolidated results rose 36.3% from a year earlier. Operating profit rose 30.3%, so the operating margin, operating profit as a share of sales, slipped to 10.5% from 10.9%. Profit also grew more slowly than sales in the quarter before, a reversal from the previous financial year, when operating profit outgrew sales in each of its second, third and fourth quarters.

The reason is the cost of the steel, rubber and other materials that go into a truck. The company explains its profit on a standalone basis, which differs from the consolidated figures above, and on that basis higher variable costs, mostly materials, took ₹1,416 crore out of profit compared with a year earlier. Selling more vehicles, and a better mix of them, added ₹1,159 crore, and higher prices per vehicle another ₹1,017 crore. Price therefore recovered most of the extra cost but not all of it; volume did the rest. Girish Wagh said the price rises taken this year do not cover what commodities have added, and that the company has preferred to cut its own costs and raise prices carefully so as not to choke demand.

That walk also shows why the company's headline profit growth says more than the vehicle business earned. Standalone profit before exceptional items rose by about half, but 38.8% of the increase, by our calculation, came from other income, lower interest costs, currency gains and other items that include production-linked incentives, a government subsidy the company says it is preparing to do without.

Cash needs the same reading. Standalone free cash flow, the cash left after running the business and paying for investment, was ₹4,600 crore, against cash profit after tax of ₹2,287 crore. Working capital released ₹2,679 crore, more than the whole difference; capital spending of ₹483 crore took some of it back. Within working capital, the company owed suppliers more as purchases rose, while stock and receivables built up for the Indonesia order and the festive season. Gopal Ramanan said part of that is timing and will partly reverse as payables return to normal. Asked how much, he said cash flow should stay positive in the third and fourth quarters.

The third quarter offers less room. Wagh expects commodity costs to add another 150 to 200 basis points, and growth in demand to slow to very high single digits or low double digits. In May, Ramanan described the company's guidance for EBITDA margin, which leaves out depreciation and amortisation, as being in the teens; the standalone EBITDA margin was 11.7% in each of the two quarters since. Asked what would lift margins, he pointed to cost efficiency.

Volume could again do more than the outlook suggests. Wagh said the company lost some demand for mid-sized trucks and electric small vehicles because it could not supply enough, so easing those shortages would add sales. The comparison itself is about to change, too. If the offer's conditions are met, Tata Motors expects to settle its offer for Iveco on 30 October and to consolidate Iveco from next quarter; about 35% of Iveco's shares had been tendered by 22 October, with acceptances closing on 26 October. If the deal closes, the next consolidated results will describe a larger, different group.