Among Tata Motors Limited and Ashok Leyland Limited – what factors will decide the stock to be picked by investors in India?

Let us first look into the stock performance for the past year

Tata Motors

Current P/E: ~17%

1-Year Returns: ~80%

Ashok Leyland

Current P/E: ~25%

1-Year Returns: ~29%

So, we can see the performance for both the stocks is way apart!!

Why?

Ashok Leyland and Tata Motors do not have a huge overlap in terms of Target Market.

Let us delve further into this,

Ashok Leyland is a player in the (Ref Link: https://www.ashokleyland.com/)

• Commercial Vehicle Space (for domestic, business, defense and mining activities)

Tata Motors is a player in the (Ref Link: Tata Motors Official Website | Cars, Trucks, Buses and EV)

• Passenger Vehicle Space
  • Internal Combustion(ICE) Option (eg. Tiago, Altroz, Tigor, Harrier, Safari, etc.)
  • Electric Vehicle Options (eg. Nexon, Tigor, etc.)
• Commercial Vehicle Space (Overlap with Ashok Leyland)
• Luxury Vehicle Space (Jaguar and Land Rover)

So, you can see that the comparison may not be apt.

Now coming to the positives(factors) that can work for each company and will assist in creating value for the shareholders

Ashok Leyland

• Electrification of Buses that are being run by the
  • Public road transport corporation like BMTC, BEST, PMPML, MTC, etc.
  • State Road Transport Undertakings (SRTUs) like KSRTC, MSRTC, etc.
• Mandatory adoption of new emission norms for Commercial Vehicles like BS7 (Euro 7) from 2025 onward
• Orders from Armed Forces for 4×4, 6×6 and 8×8 vehicles for transport, support, artillery, launchers, etc.

Tata Motors

• Passenger Vehicles
  • Flex Vehicles (vehicle that runs from 100% ethanol to 100% Petrol/Diesel and the mixture in between)
  • Hybrid Vehicles (Electric + Flex/ICE)
  • Electric Vehicles (with higher range and newer battery chemistry)
• Commercial Vehicles
  • Mandatory adoption of new emission norms for Commercial Vehicles like BS7 (Euro 7) from 2025 onwards
  • Orders from Armed Forces for
    • 4×4, 6×6 and 8×8 vehicles for transport, support, artillery, launchers, etc.
    • Armored Light Specialist Vehicle (AMSV)
    • Armoured Personnel Carrier (APC)
  • Orders of Electric Buses from SRTUs and PRTCs
• Luxury Vehicles
  • Electric and Hybrid Vehicle Versions
  • Entry into New Markets
  • New Designs

These are pointers that investors can consider but not take them as definitive guidelines.

Unseen developments like Brexit, Ukraine-Russia War, Slowdown in China – have triggered huge dip in sales for JLR (Jaguar Land Rover) – that falls under Tata Motors.

Similar unseen circumstances can add as a value add or negative trigger for the companies mentioned above.

Do your research and keep track of the developments.

Sometimes good news can also lead to corrections – The following news headlines are from May 10 to May 13, 2024.

Learning for Investors: Rationale/Logic does not drive prices in the Stock Market!!!

Please note – the stocks are not a recommendation in any way.

Do you research before investing your hard earned money.

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God Bless!