Tata Motors Ltd recent move to split its Commercial Vehicle and Passenger Vehicle business units has resulted in shareholders and investors querying about possible aftereffects. However, the Commercial Vehicles, which undoubtedly might have lower valuation than Passenger Vehicles, the volatility of the performance of Jaguar Land Rover and the potential of e-buses add to the complexity of the reality.

The announcement of the demerger is not entirely unexpected, as it follows previous moves to create separate divisions for Electric Vehicles in 2018 and to spin off the domestic Passenger Vehicle business in March 2020. This latest development now incorporates Jaguar Land Rover into the Passenger Vehicle segment, leaving investors interested in domestic economic growth to focus on the commercial vehicle business.

Tata Motors’ decision comes in the midst of the company’s very strong performance across its Passenger Vehicles, Commercial Vehicles, Electric Vehicles, and the Jaguar Land Rover segments. Hence, the company’s stock has experienced a great spurt, having doubled its value for the past year. On the other hand, since the news was slightly expected, the market might have already incorporated this into their forecasts to a large extent.

While it is expected that Commercial Vehicles may receive a lower valuation than Passenger Vehicles in this demerger, the true market value of each entity will only become clear upon their individual listings, which could occur a year or more down the line. By that time, the domestic automotive industry may have reached its peak.

 For more information: www.tatamotors.com