Have Started Seeing Greenshoots Of Improvement In Auto From January-March: Tata Technologies

Summary

Warren Harris, Managing Director and CEO of T Technologies, discusses the company’s outlook amidst challenges in the automotive sector, including tariff uncertainty, EV incentive rollbacks, and global competition. Despite a turbulent 12 months, Harris expresses optimism for the future, expecting growth in automotive, aerospace, and industrial machinery sectors. He highlights the company’s target of double-digit growth, especially in the $200 billion addressable market, and anticipates margin improvements over the next few years. Harris also anticipates a resolution of tariff uncertainty in the short term, which will bring much-needed clarity for future investments.

Takeaways

• 😀 T Technologies has faced a challenging environment over the past 12 months due to policy uncertainty and external factors like tariffs.
• 😀 Despite the challenges, the company expects momentum and growth in the automotive, aerospace, and industrial machinery sectors for the upcoming fiscal year.
• 😀 The automotive sector has been particularly affected by tariffs, policy uncertainty, and the reduction of EV incentives, but there is hope for recovery.
• 😀 The company is optimistic about double-digit growth in its addressable markets, specifically in automotive, aerospace, and industrial heavy machinery.
• 😀 The addressable market for T Technologies is over $200 billion, with growth rates of 10-12% expected in these sectors.
• 😀 T Technologies is focused on capitalizing on the growth potential in its targeted verticals, with a particular emphasis on the auto, aerospace, and industrial sectors.
• 😀 There is confidence that the uncertainty surrounding tariffs will resolve itself in the short term, providing clarity for future investments.
• 😀 The company expects to see a significant improvement in its order book as the market conditions stabilize.
• 😀 T Technologies aims for a 20% margin target in the long term, but it may take several years to reach that goal due to ongoing challenges.
• 😀 Industry research and customer feedback indicate positive signs of growth, reinforcing the company's confidence in the upcoming fiscal year's performance.

Q & A

How has the automotive sector's performance been affected by current market conditions?

The automotive sector has faced significant challenges over the last 12 months, primarily due to tariff uncertainty, competition, and the rollback of electric vehicle (EV) incentives. Despite these challenges, T Technologies has seen some signs of improvement in the early part of this year, with optimism for continued growth.

What are the main uncertainties affecting the automotive sector, according to Warren Harris?

The main uncertainties impacting the automotive sector include tariff policies, political disagreements between Republicans and Democrats in the U.S., the lack of clear policy direction until November, and the potential effects of competition and incentives in the global market, including threats from China.

What are the growth expectations for T Technologies in the coming fiscal year?

T Technologies is optimistic about the next fiscal year, expecting to see momentum in its business across automotive, aerospace, and industrial heavy machinery sectors. The company is targeting double-digit growth, particularly in the addressable market of these verticals.

Can you break down the expected growth in different sectors for T Technologies?

T Technologies expects higher growth rates in aerospace and industrial machinery compared to automotive, due to the latter being a larger portion of their business. The overall expectation is double-digit growth across all sectors, with aerospace and industrial machinery seeing relatively higher percentage growth.

What is the target addressable market for T Technologies, and what is the expected growth rate?

T Technologies focuses on an addressable market worth over $200 billion, primarily in the automotive, aerospace, and industrial machinery sectors. This market is expected to grow at a rate of 10-12% annually, as confirmed by industry research organizations such as Zenoff.

How does T Technologies plan to achieve its target margin of over 20%?

T Technologies aims to improve its margins over the next few years, but it is likely to take several years to reach the 20% margin target. The company is focused on scaling its business, and while current tariffs create uncertainty, it believes that clearer policies in the coming months will help resolve these challenges and support margin growth.

What is the company's outlook on tariffs, and how might they impact the business?

T Technologies expects the uncertainty around tariffs to resolve within the next month or two, with the current U.S. administration's direction becoming clearer. Although the specific details of tariffs may not be ideal, the clarity will allow the market to adjust, which is crucial for future business investments and planning.

How does the company view its future growth prospects in aerospace and industrial heavy machinery?

T Technologies is relatively bullish about its future growth in aerospace and industrial heavy machinery. These sectors are expected to experience double-digit growth, and with momentum building, the company believes it will achieve strong growth in these areas as the market continues to recover.

What factors contribute to T Technologies' confidence in achieving growth despite the challenges?

T Technologies is confident in its growth prospects due to the improving order book, increasing customer decisions, and positive industry research reports. This growing momentum provides a solid foundation for the company to achieve its targets, particularly in aerospace and industrial machinery sectors.

What role does the clarity of market conditions play in T Technologies' strategy for growth?

Clarity in market conditions, especially regarding tariff policies, is crucial for T Technologies. Clear policies will allow the company to better plan and make informed decisions, which is essential for long-term growth. The current uncertainty is expected to be short-term, with a clearer direction expected soon.