Tata Motors Ltd (TTM) 2021 Q1 法說會逐字稿

Ladies and gentlemen, good day, and welcome to the Tata Motors Q1 FY '21 Earnings Conference Call. (Operator Instructions) Please note that this conference is being recorded. I now hand over the conference to Mr. Prakash Pandey from Tata Motors. Thank you, and over to you, sir.

Thank you, Adiksha. Good evening, everyone. On behalf of Tata Motors, I welcome you all for our Q1 FY '21 Results Conference Call. We have with us Mr. Guenter Butschek, MD and CEO, Tata Motors; Professor Sir Ralf D. Speth, CEO, Jaguar Land Rover; Mr. PB Balaji, Group CFO, Tata Motors; Mr. Adrian Mardell, CFO, Jaguar Land Rover; Mr. Girish Wagh, President, Commercial Vehicle Business Unit Tata Motors; Mr. Shailesh Chandra, President, Passenger Vehicle and Electric Vehicle Business, Tata Motors; and all our other colleges from the Investor Relations team.

We'll start the second overview of the financial and business performance from the management, followed by your Q&A. Over to you, Balaji.

Yes. Thanks, all of you. Thanks, Prakash, and thanks all of you for joining this session. Without further ado, let me quickly go into the highlights of the performance of this particular quarter. Standard Safe Harbor statement, nothing new in this time around. Go to the next one.

Product highlights. You have seen it has been despite COVID, despite a challenging situation that we faced, it has been an intense period of activity for us in the quarter. We launched the -- in commercial vehicle that Girish want to talk about it. The next-generation connected vehicle solutions called Fleet Edge.

On the PV side, we launched the Click to Drive sales platform and of course, the holistic support being provided to the truck operators, which Girish has been talking quite extensively about.

And as far as the JLR piece is concerned, the Defender in the production car Design of the Year. And Range Rover has been launched with special editions, full upgraded range. We're going to talk about that later, and same with Range Rover Sport as well. So the product offensive continues.

Next slide, Prakash?

As far as numbers for the quarter is concerned, clearly, a challenging quarter, if there was one. And revenue went down by 48%. And of course, overall, for the quarter, the losses of about INR 6,184 crore is what we had. EBITDA was still positive at 2.6%. And EBIT was down at minus 15% fundamentally because of the negative operating leverage that we see -- that we saw.

All around COVID impact and one particular call-out that I would do is that slowly gradually operations have started resuming from mid of May, both in JLR as well as in Tata Motors here. And for the quarter, JLR delivered a Charge+ savings of INR 1.2 billion. Adrian is going to talk about that in greater detail. I'm delighted that we are stepping up the target even further in the coming -- in this quarter for the rest of the year.

And in India, what we committed at INR 6,000 crores of cost and cash savings is starting to coming through with good momentum. There's obviously a negative leverage both places.

On the free cash flow side, we had a cash outflow of INR 18,000 crore. Almost INR 15,000 crores out of that is just working capital. I'm going to talk about that. And this is significantly better than the expectation on the guidance that we gave last time around and so the cash and cost recovery efforts that are happening in both places. The only point I would make on the overall PAT line, which I'll talk about when it comes to JLR is a deferred tax asset matter, which we will cover in the JLR side.

Go forward. Revenue. This is a standard slide, a horrendous call in terms of the volume mix going down to almost INR 30,000 crore, almost entirely explaining the performance of the year -- of the quarter. And JLR impact would be almost INR 20,000 crores and TML at about INR 10,000 crores. Call-out to the TML revenue, down by almost 80% with CV down 97%. Clearly, we are in challenging times, if there ever was one.

Move forward. On the EBIT line, we had a decline that went right through. JLR and TML, both fundamentally explained by the operating leverage point. So there's nothing new in this particular thing other than both businesses are affected.

On the free cash flow slide, the call-out I would make is -- INR 18,000 crores was a cash outflow for the quarter. But close to about INR 15,000 crores of it, INR 14,696 crores that you see there is the working capital unwind, which should come back again once the business starts growing again. As far as the cash pattern of investment is concerned, that delta is only about INR 3,000 crores, which is clearly top calling out for the -- calling out the work done on the cash conservation side and the cost reduction side as well pro forma.

On the debt profile overall liquidity is adequate and strong at JLR sitting at INR 4.7 billion, including an RCF of INR 1.9 billion and TML sitting at almost INR 7,000 crores with cash of about INR 5,400 crore in the quarter ended. Net consolidated debt, thanks to the cash burn that we saw earlier, moved up from INR 48,000 to INR 68,000, almost entirely explained by what we saw in the free cash flow line. And we are expecting this should start reversing once the working capital comes back again.

Where are we on the deleverage actions that we put in place? As far as JLR is concerned, our Charge+ targets have been enhanced further to the 6,000 -- 6 -- GBP 6 billion for the -- by March of 2021. CapEx for the year at GBP 2.5 billion, confident that we will get there, and we are reconfirming that we will be cash positive from FY '22 onwards.

As far as India is concerned, update on ForEx cost and cash, INR 1,000 crores almost delivered for the current quarter without working capital, which I just left it out till the time situation normalizes. And CapEx, we will meet the INR 1,500 crores number. And this is just the start of the actions that we're putting in place as we deleverage this business significantly by FY '23.

Move forward. Let me now hand it over to Adrian. And there's just one follow-up, which I would ask him to tell a little bit on the PAT, on the deferred tax asset on the PAT 9, which is probably the only tricky item in the overall P&L for this quarter.

Adrian, over to you.

Many thanks, Balaji. Good evening to everybody. Let me go through the Jaguar Land Rover results in quarter 1.

So the first thing is the losses in the quarter were GBP 413 million. That's slightly higher than last year, but only GBP 18 million higher and with revenue and volumes 53% down, then a significant impact on those cost reductions through the charge program.

I'll take the next piece straight on. That's the losses after tax. They actually were GBP 648 million. And there's a big tax charge there, 80% of which is deferred tax, elimination of prior U.K. losses. So it's accounting treatment only, noncash. And as we recover from the COVID process, later on in the years, that will reverse itself in time. And then the rest of the charge is -- the tax charge is actually in our overseas operations. We were profitable in a number of our overseas operations in the quarter. And of course, tax charges flow into local jurisdictions.

Beyond that, you see the investment number in the quarter, GBP 548 million versus EUR 795 million, so significantly lower on investment also. And that's a key input and a key driver into our cash. Outflow number GBP 1.5 billion, which is GBP 793 million worse than last year, but given the revenue was 50% down, that's quite some performance.

Overall, the cash number, GBP 2.7 billion cash number, is only slightly lower than the cash we had on hand in June last year, just GBP 182 million lower. That just shows what a super job we've done in cash management.

Next slide, if you would, please. These are the retails. Retails actually were 42% down in the quarter versus last year. And you actually see here the regional splits. And not surprisingly, given COVID actually started in China in quarter 4 last year, there was actually quite a modest impact on our China retails in the quarter, only 2.5% lower.

North America beyond that was more vibrant, 32% lower than last year. And you see Europe and U.K. particularly mostly closed for the first 6, 7, 8 weeks of the quarter and therefore, not surprisingly, retail was substantially lower. I would say that from June onwards, the pickup was quite dramatic, and we'll start to see some of that. And even though we're not showing July data today, that pickup in those regions has continued at pace post this quarter-end. So our selling rate is stronger as we go into quarter 2 and has continued in quarter 2.

Next -- next slide, if you would, please. So these are the V-shapes that we were all wanting and looking for when we did our year-end presentation just 6 weeks ago. Pretty much every region now showing it. Of course, China was the first and the most dramatic. You see the year-over-year percentage there at the bottom, followed by North America.

North America, June retails were 2% greater than June in 2019, which is good. U.K. getting back there and that we're getting a very strong U.K. July number. July will be year-over-year positive retails in the U.K. Europe bouncing back. And overseas are the collection of regional markets and therefore, unfortunately, this sad disease is landing at different points in times there for its mixed performance in overseas. And I expect the overseas recovery to take the longest and be the slowest recoverer.

Next slide, if you would, please. By nameplate, you can see the differences on the right-hand side versus the same quarter last year, so pretty much across the nameplate with an exception of one Defender, of course. We'll talk in a few moments a bit more about Defender. But we started to make Defender retails later in the quarter, the launches have started to begin in early June. And we wholesaled almost 8,000 units as well. I'll pick up that story in later slides.

Next page, please. Right. So a lot happening on this year-over-year page. Some things, of course, would be obvious. So last year in quarter 1, we lost GBP 395 million. This time, we've lost GBP 413 million. As you would expect, with a 50% reduction in volumes, substantially all of the losses year-over-year in the volume mix and market. The headline volume number you see there. And also, of course, with the dealerships closed and with a lot of people actually not traveling and using their vehicles through much of the quarter, parts and accessories was negative versus last year as well.

One really good call-out here, the China JV. You know we've had 12 months of difficult time in China, and we did commit and promise to you guys that, that would start to reverse. It has reversed. We're close to breakeven in quarter 1 in the JV. And the outlook for the rest of this fiscal year is positive also. So that's one call-out I wanted to make, given that's a commitment we had previously made to you.

VME, pleasing as well, same level as prior year, even in a very, very difficult market. So even though our volumes were down, we were pretty much selling the units at the level we would previously have been at, which is good. And lots of good news here on warranty. We did have a bad quarter in Q1 last year. And we've had a good quarter this time. Warranty, you see there is down to 3.8% of revenue. And I've talked about warranty previously.

We're becoming more and more confident that the quality of our vehicles are improving. We're now picking up quality awards, as you would have seen from the U.S.A. on some of our nameplates also. This is another commitment we've given to you previously that has started now to show in the actual results. Warranty is a huge lag indicator, of course, because our rules of the road make us quite conservative in the reporting of the data. But I do expect later in the year for these improvements to continue.

Material cost. Our cost reduction efforts in the quarter was slower than last year, as you would expect, given the nature of what's been happening to us and the supply base and there's also some lump sum settlements we made to certain suppliers in the period. So that's one to watch. Later in the year as we turn back to normality, I expect the power of our Ignite material cost savings to start to kick in, in the second half of this fiscal year.

Great performance on structural costs everywhere. Fixed marketing selling. We did receive monies from the U.K. government called Furlough for employees who actually were not working. We had 20,000 employees at one point in April, actually at home. And we were receiving a contribution to their salary from the government that's shown in there. And the other one to call out here is the destocking. That's effectively manufacturing inefficiencies when we don't build cars. And therefore, there's very much a twin between the destocking and the money contribution we would receive from the government on furlough.

Big improvement versus last year on exchange. As you can see there, all elements are operating. But the one I wanted to call out here was the realized hedges. We're crystallizing all of those very old hedges that were put in place. Pre-Brexit and versus last year, our losses on those contracts were GBP 100 million lower, although we still did lose about GBP 49 million on those contracts in the quarter. And that's, of course, because the spot rate on sterling has been so weak over the last several weeks and months, although strengthening of late, as you would have seen. Charge GBP 1.5 billion lifetime on cost and profits. And we'll call out that a bit more later as well.

Next slide, if you would, please. Really important slide as well. So we lost the GBP 1.5 billion cash in the quarter. You will remember, we said to you in June with loss in April and May, which we had, that tells you we actually were cash breakeven in June, which on a 50% lower wholesales, which June were as well, that just shows the power of the program once the working capital disadvantages are worked through. Balaji made the point, once we start building cars, that will build back later on in the year starting in quarter 2.

So our underlying cash loss was about GBP 400 million. Look at the bottom piece, right? Our underlying cash loss was actually lower than quarter 1 last year. Even though volumes were 50% lower, that's how powerful the Charge program and the actions we've taken and the speed of those actions has had a dramatic impact on quarter 1.

Next slide, if you would, please. Okay. So investment much lower as we committed it would be. We still hold on to the full year guidance of GBP 2.5 billion. GBP 548 million of that we spent in quarter 1, reductions in all categories, although capitalized expenditure was lower year-over-year. And of course, a number of our engineers were actually not engineering. They're at home. And therefore, that's -- their costs were expensed. That's why the capitalization level was lower, about 61% in the quarter, I believe.

Next slide, please. Okay. Let's take a look at a little bit more strategically. We could spend an hour on this or 10 seconds. I'll do the 10-second version. Significant risks, we all know that. In a month's time, the page will shape slightly differently. So obviously, the name of the game here is not to be too exposed and extended and with basically our principles of lean business, inventory, investment expenditures, which have been triggered over the last 2 years with charge and have accelerated in the quarter, will continue until we start to see that stability that we all hope and pray for.

Next page, would you, please. Okay. We said this was a demand-led restart. A lot of people were saying it, but I think you will see from this page, it's starting to come through and work. 98% of our dealers globally, just over 1,500 dealers in total were fully or partly open. In North America, given the restatement of some of the outbreak in some of those states, then a few more dealers were closed in June.

You see on the right-hand side what that means to our production. Now all of our plants are actually open with the exception of Castle Bromwich, which actually does open when everybody returns on the tenth of August. And some of our plants already are back on 2 shifts, producing the SUV-5 vehicles at Solihull and also the Defender vehicle in Slovakia. We had a good mix in the quarter. Even though we were down overall on sales, we had a good mix of sales with our largest vehicles and our Defender's high demand for those units even during quarter 1 COVID.

Next slide, please. This is a really important slide, and we hopefully will get the message over. And the reason for showing it is 2 things, actually. One is, at the end of March, given sales stopped really, really quickly, U.K., Europe, and North America, we had an acceleration of our dealer stock. Our inventory. As you know, March is our biggest selling month from many respects. COVID actually hitting most of our regions at mass was actually the worst place for it to land.

We built the cars, we'd ship the cost to the dealers and then all the dealers closed. That means we had a huge increase in dealer inventory. That's shown actually on the blue line as we went from December through to March. Of course, we don't build all those vehicles just before. We distribute them evenly across the quarter, and we build up our inventories, waiting for that March sow-down. And it didn't happen.

So we are significantly overstocked. That grew to 109,000 units in May, and we're working really hard to get our dealer inventory back where it needs to be. It dropped to 88,000 units just over at the end of June. And it's dropping even more dramatically in July. When we show that on a day's cover perspective, we had well over 140 days at the end of March, which is far too much stock at the dealers, of course, for the reasons I've just said. A drop dramatically to 90 days in June. And again, it's falling even more dramatically in July.

Our target is 55 days. We believe we'll mostly get to that target by the end of September, either September or October. And the real point is, of course, here, when we're retailing more than we're producing in wholesaling, and that's a short-term dramatic impact on our efficiency on the cash coming into our business, and that will continue in quarter 2. So we believe we will be loss-making in quarter 2, but overwhelmingly, because we will be repairing retailer inventory. And once we've done that, and I don't think a lot of people expected us to cleanse our business as soon as September, given when COVID landed. Once we've done that, we will start to see a normalized half 2 where production, wholesales and retails are very close to the same number with the exception of CJLR, of course, a joint venture, which we show as a retail number, not a wholesale.

So our job's to repair this by September, and then we will then see dramatic improvements to profitability in the second half of the year. This page is telling you, we're on track with that. In fact, we're ahead where we expected to be. And July numbers dropped down to 70 days just over. So a dramatic improvement in July also.

Next page, please. Okay. New product, great new product actually on our Range Rover and our Range Rover Sport. New 48 MHEVs going into -- the battery is going into the MHEVs, 12% improvement on efficiency, 12% reduction on CO2. Lots of special editions, including quite a dramatic color there you see. The Fifty, this is the Westminster, SVAutobiography, all of that coming through. Same on Range Rover Sport as well. These cars are selling really well in this period, particularly in our big regions, China and North America. So we're really pleased how these SUV-5 units are still selling in that part of their life, and they will continue to do so over the rest of this fiscal year, we believe.

Next slide, please. Defender. Wow, okay. So we had a good June, even though the launch, as you know, was stunted as a result of us not wanting to launch when dealers were in shutdown. We did go ahead with some virtual launches. But you can see at the bottom there by region when those launches started to land: U.K., Europe in May; North America, June. And 24th of July, we launched in China also.

We've got 30,000 orders already, right, which basically means there's a full order bank, most for the rest of this calendar year. We've got more than 1,100 orders from China from the week-ago launch as well. So a really sensational response to this vehicle. So sensational, we've decided to delay the launch of the Defender 90 and which will now be later in the year to make sure we give the 110 a chance to reach all of its intended customers before we bring out the next super derivative of this super vehicle.

BMW decided they couldn't do this. So did Ford. Jaguar Land Rover and the Tata Motors launched this vehicle. It's a dramatic vehicle and it will be successful for a generation to come in many, many, many forms. We are so proud of the achievement of the team on the Defender.

Next slide, please. Okay. Electrification. We told you again, there'll be a huge increase in the electrification offerings we do over the balance of this year. So we're moving to 1 BEV. You know that the I-PACE HP HEVs by the end of the calendar year and eleven MHEVs through this as well when we launch finally '21 model year vehicles. This is our portfolio that will make us compliant from '21 calendar year onwards.

Next slide, please. Charge. Charge has charged faster than we expected it to be able to do. It's had a dramatic impact in the quarter, again, GBP 1.2 billion worth of savings. We've actually artificially reduced some of those savings on inventory because you would have noticed from the earlier slide, inventory actually dropped GBP 841 million in the first quarter. We're only reporting GBP 400 million of that within this data because we think that is the underlying improvement we'll make across the fiscal year. As we build up our sales, the inventory will grow. So we've only reported the full year number that we expect rather than the quarter 1 number.

But even say in that GBP 1.2 billion across cost profit, which I took you through earlier inventory and investment. Off the back of that, we've improved our outlook and our target to GBP 6 billion. We're already at GBP 4.7 million. And there's GBP 1.3 billion for us to go over the balance of the year.

Next slide, please. And this is where we believe we will find it. Investment will be within that GBP 2.5 billion target range. Don't forget, last year, it was GBP 3.3 billion. So in total, GBP 800 million will come from year-over-year investment improvements, of which almost GBP 300 million was in the first quarter.

Inventory, we've capped at the GBP 3 billion level, as I've just said. And the rest will come from a mixture of profitability and cost reduction. And I've already indicated 1 or 2. Warranties starting to come through, and we'll deliver more as we progress through the year as those '20 model year cars which have significant improvements across all nameplates versus earlier model years will start to impact our actual results, cash spend.

Material costs will build through Ignite. We talked about Ignite last time. So in Dualam, again, that will be in the second half of the year, and we will certainly -- we're starting to see a stabilization of VME. And the power of lean inventory and pipelines are shown first in China. Transacting prices are increasing in China for import business, and that means our variable marketing reducing in China for import business.

So we're very confident in the program. We've gone early to the GBP 6 billion level. We think that's a great target for the full year, and we'll come back and report quarterly our progress against that target, which we believe we will deliver.

Next slide, please. Okay, new funding. No changes since we talked on the 15th of June. So it's still the China 3-year facility that of course, the cash is now drawn down on. And the 2 smaller facilities, the biggest of which is in the U.K., which actually rolls out later in the year. We may take opportunities later in the year to refresh our borrowings to build our liquidity but that will still mean the investment targets as quoted, will remain the same.

Final slide for me, next. Okay. So outlook, of course, it's uncertain. And therefore, we will not overextend ourself in this uncertain period. Quarter 2 fiscal year sales volumes, they're going to be higher than quarter 1. I've mentioned that we'll be repairing dealer inventory. So not all of that improvement will flow into wholesales, revenue and cash in. And therefore, we do expect to be loss-making in Q2. But I also expect to be cash positive every quarter this year as we build back that working capital that we saw dramatically impacting over the first 2 months. And I expect us to be sustainably cash positive from FY '22 also, and that's the power of the program that we talked to a lot that will continue to reduce -- improve our efficiency and reduce our breakeven points and at cash generation points.

Focus areas, new models, lots of them coming through. Great point in the marketplace they're hitting. The Range Rover, the Range Rover Sports to Defenders. This is another sweet spot for us. The cash savings we talked about on charge and the investment guidance, GBP 2.5 billion this year and up to GBP 3 billion from next year, which is lower than the previous guidance we would have given 2 quarters ago. I think that's my final slide.

Thanks, Adrian. Moving quickly on to Tata Motors. A very, very challenging quarter there with the revenues grown 80%. And the point of highlight here is almost everything is operating deleverage that you see. And the negative operating leverage is a better way of putting it, resulting in a PBT loss of INR 2,190 crores.

The only piece to draw your attention is on free cash flows. We're at INR 4,300 crores, INR, 4,294 crores better than last year and better than what we guided as INR 5,000 crores. And we will talk a little bit about cash in the coming slides as well.

Next slide, please. PBT is almost entirely volume and mix and the fixed cost are numbers that you're seeing are flowing through savings more or less getting offset by the loss of dividends from subsidiaries and finance costs as well. So overall, it is a volume mix story. \

Free cash flow, of course, we talked about. Out of the INR 4,294 crores, almost INR 3,000 crores is working capital. And out of the INR 3,000 crores, almost INR 3,300 crore is payables. It just tells you that we've just paid people and no revenues to be collected, and that is the impact that you see out here. Better than last year, but not better than guidance, of course. Move forward. Investment spending in a move-forward, nothing to report here other than complying with the guidance that you put out there.

On the cash savings, we have delivered INR 1,022 crores to-date. Split it up, out of the INR 3,000 crores investment plan we have delivered INR 480 crores which is a reduction over the same period last time, and we will deliver the INR 3,000 crores as the year progresses. Working capital, consciously, we have not taken it because we want to wait for business to resume before we call out anything on working capital. You can't do that with an 80% reduction in revenue. And as far as cost and profits are concerned, we are off the blocks at a high pace, delivering almost INR 540 crores in the cost and profit line, which is reassuring.

So we are quite on track to deliver the INR 6,000 crores that we called out going forward. Compared to last time, the only additional call-out is that an additional INR 3,000 crores of loan have been secured. And therefore, at this point in time, liquidity is adequate, but we'll continue to evaluate options to shore up liquidity while reducing net debt. The commitment to reduce net debt, both in JLR and TML stand, but we will look at options to improve our liquidity position, of course, going forward.

On the commercial vehicle side, I'll then hand it over to Girish in a minute. The market shares overall, down 29.6%, fundamentally led by the salience in the SCV segment, given medium and heavy commercial vehicles and ILCVs actually were very, very anemic at this point in time. We continue to be impacted by the supply situation because of the intermittent lockdowns that are there in various parts of the country. And therefore, this is going to be a challenge for us to address in this particular quarter to get this under control. So that the supply chain moves to a more rhythmic manner compared to the stop-and-start mode that we are currently working on. And so Girish is going to talk a little bit about it as well.

Move forward. Overall, on the numbers, a staggering 97% reduction in volumes and a 90% reduction in our most profitable segment, which is what is causing the pain and grief that is out there. At this point in time, demand remains muted. Unfortunately, there's no mega signs of renewals, though there are green shoots a little bit here and there that Girish will talk about. And clearly, there is a cause of concern on the vehicle financing area, where the rise in prices of BS-VI vehicles as well as financials getting more conservative on the loan-to-value ratio, very clearly, the amount of equity that the customers need to put in is increasing. And we are working with the financials to say what is the best way to unlock it, while at the same time, managing the risk for them. So this is going to be a key piece of work for us in the coming quarter.

Go forward. Girish, can I hand it over to you on the demand side?

Yes, Balaji. Thanks. So I think -- hi, everyone. As Balaji mentioned, I think the industry collapsed by almost 85% in Q1. And to a great extent, the retail started happening towards the end of the quarter. And for us, therefore, this quarter was more about producing and stocking up the dealers because we started this year with 0 inventory at the dealers. And that's what was our focus as of now. And therefore, one can see that the retails have also actually lagged the wholesale, which will continue for some more time as we -- and of -- keep on stocking up the dealers to the required level.

Then come to the demand situation, a few key points. As Balaji also mentioned, I think the financials are taking a conservative approach. But I must say that there has been improvement in the month of July. So from -- as we move from Q1 to Q2, there has been an improvement, while we are speaking about Q1. So that's some silver lining now. I think the loan-to-value ratios were not to the level of BS-IV, that is pre COVID, in BS-IV. Has also, I think the retail customers are finding it difficult to get financed. But gradually, the situation is improving, and we see this improving as we go further. We have been engaging with the financials to come up with new products, which actually, in some cases, ensure that the EMI remains same as BS-IV level or at least the total cost of operation remains the same for the customer. So I think that's the kind of engagement we are having with the financials.

As far as freight levels, if we see. So if we look at the data at the old stations, so eBay bills. So one sees that towards the end of the quarter, we had reached around 65%, 66% of the pre-COVID levels. So the freight is to that level, if one can say and is also seen in terms of the diesel consumption. I think driver and labor unavailability still continues to be an issue with the reverse migration of labor that has happened. But gradually, the situation has been improving. And as the fleet owners are getting freight to transport, gradually, we have been able to pull the level back.

Monsoon, of course, like every year is dampening the revival in mining road in frame construction. Although we do see the new projects been coming up, especially from [NHL.]

In terms of school reopening, I think ambiguity is more about the timing. So as of now, the schools are not open. And also most of the staff is working from home. And as a result, requirement for staff buses is also very, very low. And therefore, amongst buses, I think it is only the ambulances, which is kind of a saving grace. Otherwise, both school and staff, which form a key requirement in quarter 1 have actually almost collapsed to 0.

Government's limited spending capability, I mean all of us know. So the amount of money they are able to spend in new projects will be very key to determine how specifically M&S Series start recovering going ahead. Some of the bright spots, I think, as I said, from April, May, June, the inclinations have been improving. Freight availability is improving. And in fact, if you see 1 of our workshops have already reached 100% of the revenue level from pre-COVID level. So that's a very good sign, which means that the vehicles have started running and the job cards being opened at our workshops are almost to the pre-COVID levels.

Rural economy is clearly leading the revival with higher rabi crop and as well as good monsoon promising a better future. We see some of the green shoots in steel, petroleum, especially FMCG and e-commerce, pharma, dairy, fresh produce. So these are some of the end-use sectors, which are doing well, and there are quite a few inquiries which are coming up from these segments. And even within that, specifically, one sees higher demand for the last mile distribution, which is addressed by the small commercial vehicles. And therefore, the sale-ins of small commercial because has further gone up almost up to 80% of the industry. And after that, one sees there is a demand for the light commercial vehicles.

So in terms of demand contraction, I think it is maximum in medium and heavy commercial trucks as well as buses and then one sees slightly better in ILCV and SCV. Most -- I spoke about workshops, getting back to the earlier pre-COVID level, which is a good sign. And whatever vehicles we have been able to retail has also demonstrated to the customers we see a good acquisition coming from the customers to the intent with which we conceptualized, developed and delivered these products. And they are appreciating the improvement in the total cost of ownership. So we therefore intend to leverage this as we go ahead to push the retails.

Prakash, next. So what is it that we have been doing and what we will continue to do? So on the sales side, the demand generation side, I think upskilling the sales force because still a lot of work is happening through digital means. But the good thing is as a part of this, there is a lot of digital reskilling, which has happened for most of our sales force, and people are getting comfortable with this. Of course, the last mile part of converting that lead into a sale, which is about physical document collection, et cetera, still continues. And in some cases, it's also end of a bottleneck.

We continue to engage with the customers and all other stakeholders in the system, whether it is financials, body builders and so on and so forth and continue to address their needs. The focus of our communication, as I explained in the last call about our BS-VI pricing strategy so it continues to be more of value communication and focus on market operating price. And improving the performance through more and more FEED trials despite the oil-related difficulties.

We have to support our value proposition in the product. We are coming with a new value uses. And 2 of them, I would like to speak here. I think the first one is about uptime and turnaround time guarantee, which we have introduced. So as we have been touched with a lot of end-use sectors. So depending upon the need for specifically for e-commerce sector as well as the tipper in construction and infrastructure industry, we have come up with this value-added service of uptime guarantee as well as turnaround time guarantee in case of a failure, which is catching traction with the customers, adds a lot of value to them.

And second one is, as Balaji mentioned in the preamble, is about launch of our next-generation connectivity solution, which we have branded as Fleet Edge. So the perform of the Fleet Edge is to improve the equipment fleet efficiency by leveraging our connected vehicle platform, which is, in fact, common in terms of hardware and the basic software on that is common between EV CV. But all the applications are, of course, customized for a specific business unit. So it addresses the top pain points of fleet customers like reducing the operating cost, then having better control over cash flows, then having integrated view of fleet utilization, having better control over the trip and trip times, driver performance.

So I think the purpose is to therefore provide the customers through better control and fleet productivity through trip management, asset management as well as business management. So this is the first version or MVP of the solution that we launched. We continue to come up with upgrades in the Fleet Edge as we go ahead. So this is -- this will also further help us to deliver higher value to the customers through digital means. Last point on demand.

Just conscious of time because if you could run through this then, I'd love to give more time for Q&A as well. So if you could just.

Yes. I think we continue to focus on demand fulfillment through volume ramp-up. So a lot of focus on monitoring all the vendor sites, more than 1,000-plus vendor sites are being monitored to ensure that we do volume ramp-up. And also, we are -- we continue to comply with all the safety guidelines and standard operating procedures across the plants. The focus on cost reduction and cash conservation continues. So I think whatever targets we've set for ourselves, the first quarter targets have been met on both and we also continue to develop the visibility for the target set for entire year. So we are on track on this.

So that's it, Balaji, back to you.

Thank you, Girish. Quickly moving on to passenger vehicles. The key call-out is the market share increase to 9.5%. Obviously, the range -- the NEW FOREVER range as well as the new launches have done exceedingly well for us. Obviously, the first quarter, so therefore, we won't get ahead of ourselves, but quite pleased with the way the reimagining PV call-out that we have done is now starting to yield results. July continues be strong as well. So let's see how that finally plays out. Other call-out is the EV market share, which continues to do well for us at 62%, and we're seeing strong demand for the next one EV there.

Going forward. P&L-wise, again, it's fundamentally an operating deleverage story that you're seeing out there with a revenue drop of almost 60% so we aim to reach EBITDA breakeven at the earliest, as far as this business is concerned because clearly, we're seeing the momentum starting to build. And we want to get as soon as possible to where we were and then build from there on.

Move forward. Shailesh, can I hand it over to you real quick?

Yes, Balaji. So let me quickly talk about the impact of pandemic on the entire value chain of PV industry, which in Q1 declined by 78%. So talking about the demand side first. After 0 industry sales [through June,] the industry progressively witnessed revival and demand from May, which was basically supported by pent-up demand post lockdown and also demand for new BS-VI upgraded cars and greater preference for personal mobility owing to risk of catching infection.

During the quarter, there were stringent guidelines imposed in the country to start with which then transitioned to staggered start-stops in different part of the country, which actually created periodic disruptions for us. Also the stringent guidelines that had to be followed through the new way of working in the industry.

In EVs, we saw that the fleet demand collapsed due to major shift in the employee transport segment wherein in work-from-home policy in IT companies started. So how our traction in the personal segment, as Balaji mentioned, has continued and the EV segment has grown compared to a very low base of Q1 last year.

As far as management network operations is concerned, going to the manpower challenges and constant anxiety or intermittent downtown, it was a very tough situation for the network. Inquiry generation was also a challenge because outdoor BTL activities could not be done. And therefore, also, there was high dependence on digital inquiries, steady calls.

As far as the lending environment in retail and channel finance is concerned, the share of NBFC loans significantly dropped from 35% to 13% due to a very conservative approach in the uncertain environment. And with the changing consumer profile and mix, which was skewed more towards salaried and government customers, share of actually PSU banks saw increase and loan to the dealers also for a very strict sanctioning process.

On the management of supply for demand fulfillment, was very critical in Q1, actually, those who are able to supply more definitely were the beneficiaries. It witnessed multiple challenges on the supply side. Also, the demand pattern kept on changing. So it was important to dynamically check and align the supply also to that.

Major suppliers were affected with very high absenteeism. Social distancing rules also hampered the capacity and output as less workforce could be deployed in the factory so that one could comply to the 6 feet social distancing rule, et cetera. And supply has witnessed a significant working capital deficiency issue. So this was the impact on the entire value chain.

If we move to the next slide? Yes. So on -- in the supply chain in these supply challenges, what was we saw in the industry, we continuously worked on actually smoothing the supply situation by ramping up our operations post lockdown. And our factories in Pune and Sanand was smoothly ramped up adhering to all the safety and social distancing guidelines.

Our manpower availability and deployment also ramped up gradually, as you can see some figures here. Production could only restart in a proper manner in June. And post that, we have steeply ramped up in July to service very strong demand. As far as suppliers were concerned, they too started with very similar challenges. And by June, 100% of them although had resin operations, but manpower availability remained a challenge, which over a period of time, also improved in their case. In this period, we ensured that we provide full support to the suppliers to overcome their financial concerns and wherever needed also on sourcing of manpower. And we have continued to ramp up our operations to service very strong bookings that we have been getting across India.

Next slide. Yes. So in the front end, also we initiated multiple actions for recovery and growth. On enhancing sales growth, we are focusing on retail-driven growth by aligning ours as quickly to the changing demand pattern. We also introduced innovative financing schemes for the changing need and preference of the customers. Example, low EMI and long tenure schemes. And also to maximize alignment between supply and demand in the challenging environment, we ensure a very close coordination among dealers, sales team and back-end team.

On the after sales side, keeping in mind the health concerns of customers and movement restrictions we reached out to customers for home service to get their vehicle on road, provided special service for COVID warriors, giving them the priority. Also, we were very limited around extending the warranty period wherever it was expiring and also ensured that standardization measures and full safety of our consumers were taken care of.

As far as network was concerned, we understood the difficult period for our channel partners. And in the crisis period, we did extend best possible supposed to support to them to ensure their business continuity. We actually redesigned the incentive system also so that we could help them get better profitability in these uncertain times. And we -- in this tough period, we ensured a constant engagement and better coordination with them so that we could ensure retail momentum and with the mindset of creating a win-win proposition for both automotives and dealers.

On the digital initiative, which has become very crucial in the new normal, and that has been evolving. We activated our Click to Drive support online lead generation, booking and interaction with sales executives. This has really made it convenient for the consumers, and I think this will be increasingly become the new way of car buying in the customer journey. Also, we have been supporting dealers and creating their [strategies] through to Google my Business, which is helping them in local and high-quality lead generation and also managing the pipeline and customer relationship better. So EV business with all these efforts, I think, is progressing well in its reimagining journey to win sustainably.

So back to you, Balaji.

Thanks, Shailesh. Moving forward quickly in the turnabout of time, conscious of time, let me just call-out the key points here.

This is a quarter where you probably -- everything was on moratorium in terms of GNPA calculations in terms of disbursements being very, very down. So therefore, it's been a very quiet quarter. But at the same time, it's a quarter where a lot of solutioning has been done with the business to figure out base to actually drive growth, while at the same time, minimizing the portfolio risk. As we look forward, the coming quarter is going to be very key because collections are a very key focus area as the customers come out of moratorium.

We are seeing an encouraging trend of people wanting to pay and come in. Therefore, September is going to be a key month, and all efforts are there to ensure that we land that well. Internal work on both gaining asset-light as well as cost income ratios which are continuing to improve. That continues, and the business has sufficient liquidity at this point in time. So this quarter is okay, let's see how the next quarter actually lands. And if we get that right, I think we're in a good place.

Looking ahead, I think the key call-out, we would say is that as both JLR and TM and an overall group, we have committed to sustainable positive cash flows and wanting to ensure that we want to reduce net debt significantly, while becoming future-ready. That's a big call-out. The individual pieces are there as to what each of us are doing. For the alignment and the messaging and the focus of area of us and our teams are absolutely spot on.

With this, let me end here and hand it back to you for questions at end.

Thank you, Balaji. (Operator Instructions) First question is from Robin Zhu from Bernstein. And the question is on JLR. The first question is, it's a little surprising, given the very high ARCU China import mix and weak GDP that the variable profit margin was not stronger. Could you discuss the positive and negative impacts on the variable margin during the quarter? Is it reasonable to say that Q1 will be the lowest level of the year? That is the first question.

And second question is how confident are you that the monthly run rate in Q2 and Q3 will be higher than in June? What level of year-on-year margin headwinds do you expect from rising EV mix in FY '21 versus FY '20?

Okay. Let me take them in the order you asked them. So the elements of the mix, most of these shouldn't be surprising. I don't think, obviously, China, North America, SUV-5, both recovered with the 2 regions that recovered quickest in the quarter, and they start to explain why the headline gross revenue numbers per unit are higher than normal.

Obviously, the offsetting factors here, to some extent, are manufacturing footprint and inefficiency we had in the quarter. We start to show some of that with the destocking line, but also the material cost adverse, you would see that. We didn't get as much TVM or cost reductions in Q1 for obvious reasons. That GBP 52 million adverse, is about GBP 1,000 a car, of course, on our wholesale profile. So those are the reasons why it was strong, but reasons why in Robin's words, it wasn't as strong as you would have anticipated.

From a run rate perspective, the second question, yes, we do see the retail rate run rate increasing in quarter 2 versus quarter 1. Your specific question was June. We'll start to see July sales levels consistent with June, actually. But if you look at our prior year profile, June was significantly higher than July last year. So on a year-over-year basis, July will hold up very well versus prior year.

Overall, the quarter, the actual reduction to last year. We do expect a small reduction in retail, but nowhere near the 42% level. I think June was down 18%. We will be better than that in Q2.

From a retail perspective, we do expect year-over-year reductions to increasingly reduce. From a wholesale perspective, we'll build it back up. We will be higher in Q2, maybe 40%, 50% higher than Q1. We're building about 80,000 cars. So that should give you some direction about what the wholesale numbers at the optimum level would be close to being.

And the final one you asked, I think, was about EV mix. Well, obviously, it depends on what the take-up of those EV vehicles are when they actually come to the marketplace, et cetera. But I think it's reasonable to assume that like-for-like if we increase EV and PHEV sales, the contribution is going to be lower. We know that. And that's why the important data we shared earlier about our confidence in improving warranty, our confidence in improving material costs in the second half of the year. And in a very disturbed market, our VME was similar to levels pre-COVID. All of those improvements will start to come through later in the year and offset or may even be favorable to the PHEV mix we are seeing in the balance of this year.

Okay. Yes. Thanks, Adrian. Next question is from Arvind Sharma from Citi. Can you please talk a bit on the tax charge? Does it reverse over the rest of the year? So this question is also for the tax charge [in the incrementals.]

Okay. So the majority of the charge, just over 80% of it was the U.K. losses previously recorded as a deferred tax asset. COVID stopped that. So we have to have confidence that we have a line of sight to solid profitability in the U.K. for that to reverse. Given COVID is going to be with us in part next quarter, the dealer inventory reparation work we need to do, it's most unlikely there will be no reversal in Q2.

We created the DTA during the course of last fiscal year, I think off the back of 2 solid quarters of profitability. So if history repeats itself, you'll need to see that before we actually start to replace it. It is time, though, right? This is just time. Whether it hits at the end of this fiscal year or early next fiscal year, it will actually show itself again as a deferred tax asset once we start to see those losses eliminated and a sight to profitability.

Thanks, Adrian. Next question is from Sahil Kedia from Bank of America. And the question is again for JLR. At JLR, a lot of Q8 Charge+ savings are lower expenditure and furlough-oriented. Cost reduction itself appears low. What are the areas in which we're likely to focus to achieve the FY '21 target?

Yes. Well, it's an interesting perspective to take that cost reductions were actually low because they were actually huge. I think you need to understand what the processes we use to drive this. We basically used a 0 basing of spend in the quarter. And that's why we actually have the dramatic impact within the quarter. So if you think that this is a demand-led recovery for production, it's also a demand-led recovery for expenditure. And we will keep those processes in place until the revenues we start to see come through, probably through into Q3, come back to a normal level.

Now underpinning that, some of the other structural items that you would expect to see in terms of -- you'll see the reported numbers around headcount. Headcount levels continue to fall. Don't forget pre-charge headcount levels were 44,500 people. At the end of last year, they were 37,400, I believe. And they'll be lower than that as we go through September.

So some of the underlying physicals will start to reduce and continue to reduce as well as that 0 basing. So I think you'll be surprised the amount we can do with these processes as we go through the course of this year. Once we actually start to see properly what the more certain revenue streams are later in this fiscal year, this will be a better discussion to have in terms of what our responses then need to be as a continuum.

Thanks, Adrian. Next question is from Sonal Gupta from UBS Securities. Question is what percentage of EU sales come from Germany? What benefit do you see from increased EV subsidy?

So EU sales from Germany, just under 1/4 of our sales in quarter 1 was from Germany. So that gives you a sense of that.

What benefit do we see in terms of the increased EV subsidy? Well, in terms of future subsidies? Really difficult to tell, although history may repeat itself, of course. We remind you when subsidies came into different markets, Netherlands, Norway and the U.K. There was quite dramatic response from customers for a very short period of time.

So it really depends how big those subsidies are, how long they stay in place. But we do expect an improvement in those EV sales in the markets when they're announced. But it won't have a huge and dramatic impact on our financial position. Of course, it will have an impact going forward on our compliance position.

Thanks, Adrian. Next question is from Chirag Shah from Edelweiss. Question is again for JLR. First is new launches is basically new platform of RR and RR Sport time line and any delays in the same?

And second question is hedge book, is the hedge rate still favorable? And what are the key monitorables to watch out for?

And the third question here, are there costs that are likely to come back as business normalizes?

So I'll take the first questions. Special editions will be on sale as we come back from shutdown later in the year from our '21 model year vehicles. So think about it accessible to customers from the second half of the year. Increasingly, of course, as ever, along with our pipelines, so our pipelines in U.K. and Europe are the shortest. Just so if you look at your Defender profiles, you'll get the same rollout by region and by market month after month after month.

I'm going to ask our treasurer to answer the hedge rate question, if you don't mind, Ben?

Yes. No, sure. I can answer that, Adrian. So the hedge rates on the key currencies, dollar, euro and Renminbi CNH are similar to what we talked about when we had the call just about 6 weeks ago. So dollar relative to market rates is somewhat unfavorable. Renminbi somewhat unfavorable. Euro is actually favorable. The pound has actually strengthened against all the currencies over the last couple of weeks. And it is actually the case that our hedge book is actually in a positive position now, whereas it's been in a negative position. So that's just because of the movement in the currencies.

But it does depend over time because it does include hedges that mature in FY '22, FY '23 and beyond. And the hedge rates are a little bit less favorable in FY '21 because we've still got some old pre-Brexit hedges.

Thanks, Ben. And the last one, I think we touched on a little bit, but let me kind of come at it from another angle, just to make sure I respond to the questioner.

I mean we will build up the costs as it comes back. Some of that will be natural as a result of activity increasing. We will be building more cars. We'll be bringing more people back from furlough to build those cars. And the furlough offset moneys from the government would go away, of course. We will build up some of those structural costs. I've mentioned that already.

But please be clear, the increase in variable profits that we get will be greater than the variable costs and greater than the build-up in structural costs, which is code for, we will be profitable in the second half of the year.

Thanks, Adrian. Next question is from Kapil Singh from Nomura. And he has said, congrats on good results under challenging circumstances. And the questions are, first, why is JLR not working on launching new BEVs as PHEV seems to have low electric only range of around 20 miles. That's the first question.

Second question is, can you please give some color on why is the selling price for JLR has increased so much? What percentage of revenue for JLR in Q1 FY '21 was from vehicles sold? And how does it compare y-o-y?

Okay. Thank you. Well, let me talk about the PHEVs first. Our range on PHEVs is 66 kilometers for the '21 model year vehicles coming through. Not 20 miles, 66 kilometers in mileage speak is about 40 rather than 20.

We are working on new BEVs. We talked about those to some extent. Some of those programs through our investment reductions and the uncertainty of Q1 were put on pause, the XGA BEV, specifically. But those programs are still in our portfolio platforms. And once we're confident those revenues are coming through and we start to see the cash, then you'll start to see our responses on new BEVs.

We won't indicate time line for launches at this point in time, of course. Average selling price, I think I've touched that a little bit. The regions that came back were China and North America, their big SUV-5 regions. And therefore, the average selling price on those vehicles are greater than regions like U.K. and Europe, which significantly have SUV-3 vehicles, i.e., F-Pace and Evoques. So the Range Rover, Range Rover Sport markets came back quickest. That's why the average selling price was higher than you would normally expect.

What percentage of revenue for JLR in Q1 FY '21 was from vehicles sold and how does it compare year-over-year? Percentage of revenue from vehicles sold on 90 some percent of it, I guess, the statutory revenue with our parts and accessories in there as well as, of course, in what's out as it compares to year-over-year, we were 53% down on volume and 44% down on revenue. So we are significantly low year-over-year on vehicle revenue.

Thanks, Adrian. Next question is from Jinesh Gandhi from Motilal Oswal. And his question is, what would be the level of utilization of plants now in July? What is driving such star improvement in realizations of 20% y-o-y? Any color you can give on share of non-vehicle revenues?

Warranty cost reduction to 3.9% is sustainable at these levels. Can you guide for the effective tax rate for FY '21?

These are all DLR questions, and then there are India business-related questions. Any outlook for M&HCV and LCV volumes in FY '21?

Hold it Prakash, let's finish the DLR, and we'll take the India questions. Yes?

Sure.

Okay. Let me hit some of these quickly. Level of utilization in plants in July '20, while still very low because we're still going for this demand-led recovery, which means dealer inventory falling, which means the stocks are already in place. I wouldn't expect, as you saw the plant shifts in place too in Solihull and 2 in Nitra. I wouldn't expect that to build across the other plants until we get through to the back end of Q2 and beyond.

Your next question, non-vehicle revenues, very light. We did dispose of some shares in the quarter for $20-some million. But very light and in parts and accessories, you saw were significantly lower on a year-over-year basis. So overwhelmingly, it was vehicle revenues.

Warranty costs, 3.9%. Is it sustainable at these levels, we believe it is. We believe the underlying performance of our new vehicles coming through at '20 model year once they mature enough for us to actually assess is lower than 3.9%. And what you find within our warranty profile increasingly as you go through the fiscal year, it's made about 2 model years only, '19 and '20's. So we do believe we now are ahead of the data in terms of warranty costs, and you'll progressively see that to come through at the lower levels. Probably in half 2, but certainly by Q4.

Guide -- effective tax rate for '21. Really difficult for me to do for full '21. It was a weird rate of 57% in Q1. And I think if we didn't have the DTA adverses, it would be something like 10% so I'm not expecting those DTA adverses to kick in again or reverse. So your ongoing level will be in the 10% to 15% rather than the -- rather than the weird 57% you had in quarter 1, I suspect.

In longer term, it would be 20% to 25%.

Thanks, Ben. Longer term, 20% to 25%. 19% in the U.K., and it's about 25% average outside of the U.K. All right, guide on effective. Anymore? That's about it, isn't it?

Sure. Thanks, Adrian. For India business, the question is any outlook for M&HCV and LCV volumes in FY '21? And what would be the level of utilization of plants now in July '20 for CVs, LCVs?

And similar to JLR, what would be the share of non-vehicle revenue in 1Q FY '21 versus 1Q FY '20?

Prakash. I might take this, the first one. So yes, I think on M&HCV and i3 forecast for FY '21, I think we are going quarter-by-quarter. It's very difficult to predict what's likely to happen almost for the entire year. So the first quarter, M&HCV volumes were pretty low, as you know, collapsing almost 90%. I mean we are looking at quarter 2 to be at total industry volume upwards of [15, 000] around that number which will be a good growth for Q1 if you compare. But it will still be a drop as compared to the previous year.

And I think for the entire year, has various independent consultants have indicated, one can see upwards of [30%] of the growth in M&HCV again. But I think this is something which we have to keep on watching quarter-by-quarter.

As far as intermediate commercial vehicles are concerned, I think they're likely to do slightly better as compared to M&HCV but still for the overall year, one can see around 25% or upwards kind of a drop. So that's about the forecast.

In terms of our plant utilizations, I think we are running at around 20%. And on an average, if we see because that's the level at which we are producing as compared to the pre-COVID ones. Of course, as in the past, Shailesh will add there, the utilizations are higher.

And in terms of non-vehicle business, we view revenue as a percentage of the overall revenue, I think it has gone up significantly in Q1, more so because of 2 reasons. I think our workshops have come back to the normalcy faster, which have led to, therefore, higher spare part revenue. And also the vehicle sales revenue has gone down. So I think the revenue percentage has actually increased 2.5x as compared to our levels in the past quarter or Q1 of last year.

Shailesh, over to you.

Sorry, Prakash, the question was regarding utilization also?

Yes, utilization of PV.

Yes. So actually, it started with a lower level of 33%. And then over a period of time, it has increased to 60% as of now. And we are maintaining at that level and also planning for 2 shift operation is the status as well as PV factory opens.

Balaji, can you comment on the last question? Raw material cost as a percentage of sales declined sharply on Q-o-Q basis, what would have driven this?

Yes, we are running on at about 70-odd percent is a normal rate. So maybe I need to take the question off-line to understand what exactly is equal because RM cost is running at about 70%. It is similar to what it was last year same time. So let me take this offline with Jinesh.

Thanks. Next question is from Pramod Kumar from Goldman Sachs. And the question is on Defenders. Can you please split the 30k orders into customer orders and dealer test drive vehicles?

And second is JLR realizations at 58.4 k sterling is the highest ever and up 20% but does this jump in sustainability of the sale?

And third is other expenditure at JLR fell 50% Q-o-Q, what are the more sustainable levels of expense as plants come back online?

Okay. Let me take them in that order. So Defender customer versus dealer orders, in any given data point somewhere between 35% and 40% of the number is actually customer orders. The rest are dealer orders. Of course, dealers are only ordering cars that they do see customers for so that's why the size of the number is really the most important piece here.

Realization is 58, 000. I think we've touched on this a couple of times. The China and North America, the SUV-5 average revenues are always going to be higher when they are a higher proportion of those sales as the U.K. and Europe start to come on board. Actually from June and then July onwards, that average will fall in quarter 2, closer to normal levels, I would suspect. Obviously, exchange rates being a piece of that.

Other expenditures, I think I'll refer to you to the Charge slide with this. We've said GBP 500 million in quarter 1. And we said half of the rest to go is cost and profit. So let me say, GBP 700 million in the rest of the year. And if you work that GBP 700 million over three quarters versus GBP 500 million in a quarter, you get again, that same 35%, 40% we believe is sustainable. And will flow for fiscal year '21, but we'll be much better to answer these questions when we start to see Q3 outlook in October, as referenced earlier.

Yes. Next question is from Sonal Gupta again. Charge+, can you

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some [under that are] restructural in nature?

I think I've answered that one a couple of times already, actually. So I'll refer to my previous answers on that one.

Next question is from [Alexander Nottingham] and it's from Goldman Sachs. This question is in your new base case planning in for FY '21 and FY '22, would it be fair to assume that [fiscal year]

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[when compared to] 1Q?

And then there's a housekeeping question on could we publish the financial report ahead of earnings call?

Prakash, I think the -- you are breaking up. So can you just repeat the question for the audience?

Okay. Okay. The first question is what volume picture are you planning for in FY '21 and FY '22? Would it be fair to assume FY '21 EBITDA margin could be similar to 1Q?

And then there is a housekeeping question. Please put the financial report we publish ahead of the earnings call.

So let me take the first one. The first one, I think we referenced to some extent in an earlier question, retails will increase from the levels we're at. But once we've destocked the dealers, which overall were due in by the end of September, you will see quite a strong increase in revenue, in wholesale volumes, in cash and then, of course, in EBITDA margins as well. So you should expect improvements progressively, some in Q2, but more dramatic in the second half of the year.

Yes. Let me take the housekeeping question on the financial reports being listed because really take today, for instance. We would have put it about 4:30 India time, and we started the call at 6:30. So we put it up about 2, 3 -- 1, 2 hours before the call, gives all of us a chance to go through the deck. And normally you should expect it in minutes. The stock exchange, it's uploaded, then the website also gets updated immediately. So there's a problem that you had in accessing the website, do let us know. We will figure out a way, figure out what happened to begin with.

Gentlemen, I just would like to make a note from my side if it's okay using the time because seeing now the time is running at the very moment. So good evening to everybody from my side. It's Ralf. And Adrian already has presented to you the facts and figures, has explained to you this huge step which all our team has made and is going to make. So no further elections from me, no repetitions.

We saw a very long preliminary immediately [in many of these] going. You know and that I wanted to share this, and you know it already that I will step down in the month of September. So it's my very, very last investor call with you today. And I want to take the opportunity to say just thank you. Thank you to all of you. And on the other hand, I want to say good-bye.

Some of you witnessed the development of Jaguar and Land Rover for more than 10 years with me. And we have talked and discussed with each other over that very long period of time. And for me and probably also for you, time is flying very much so. And if you recap the time when we started and assessed today's levels, and you see a huge difference, what a difference at all. And if you look back at the time, you will see that we had [no] coverage but rather developed quietly. We delivered outstanding products for our customers really with integrity.

We have won more prestigious awards than companies with even much bigger, larger budget. We have won quality award, awards for design and engineering, awards for technology. Think about Evoque, iPace, Velar or now the very large Defender. And by the way, somebody asked about the orders. Please take an order of Defender because it's a sensational vehicle and [off lot.]

Or think about the electrification strategy, even leading in connectivity and autonomous. New [N] maps, new [PFs], so really focused on destination 0. Our product portfolio today is outstanding and will be new with this absolutely new within the model year. And I can tell you without leaking anything, we have exciting products in the pipeline.

And I want to thank you. I really want to thank you for your challenging discussion, questions and critical reporting. But you really reported and that I value very much so the maturity of all subjects in a very fair way. So thank you very much for all your fairness. Your high quality of information for your customers and especially in this very, very special journalism in the very best sense.

You know that Jaguar Land Rover is a special company. It's 2 iconic authentic brands and really passionate and the heart-in-the-right-place employees. So together, we have really transformed Jaguar Land Rover from a very small national village method to an international respected company. It has been a long way, but I can only tell you worth every step.

So I want to wish you all personally, good luck, a lot of success and a lot of satisfaction in the future and want to say take care about yourself. And again, thank you very much, and goodbye.

Thank you, Sir Ralf Speth. Next question is from Binray Singh from Morgan Stanley. What is the cash tax payout in Q1 in JLR? And how is the profitability of PHEVs?

Okay. I think that's me again. So I think in the first couple of slides overview, I mentioned there were 2 elements. We've talked about the deferred tax. The other element is taxation in overseas subsidiaries. Where we make a local profit, we're subject to local jurisdiction taxes, Ben mentioned up to the 25% level. That's what the payments are for, tax in local national sales companies, jurisdictions, overseas territories.

The other one, PHEV, look, we're obviously estimating and guessing how many PHEVs we're going to sell, when do they come on to the marketplace. We all know the cost of the batteries and the propulsion systems with PHEVs are more expensive. We only had 2% of our volume PHEV in quarter 1. We do expect that to grow from half 2 onwards. So it will have a diluting impact on margins in itself. We will price where we can, of course, where the competition prices, but it will have a diluting impact on margins in itself.

And again, I'll go back to the earlier discussion. You're starting to see warranty improvements, VME stability when it shouldn't be stable and our work on material costs in Ignite. All are in place to make sure that we can be compliant and make sure we can offset and even grow our margins in a compliant PHEV world, which is what our job is to do. Thank you.

Thanks, Adrian. Next question is from Nishit Jalan from Axis Capital. And question is in Slide 25 of the investor PPT, you have explained detailed breakdown of cost savings from Project Charge+. Can you explain in this in detail, especially about the saving of GDP GBP 130 million in commercial means, also how much of employee cost reduction is temporary in nature?

Okay. First one. So how we measure the program is year-over-year. So GBP 131 million reduction in quarter 1 is versus quarter 1 FY '20. And all of the costs we have in our commercial world are signing costs. All the national sales companies and the people in the national sales companies and the costs of running those companies is a part of that. But also our fixed marketing investment, our advertising monies are a part of that as well. So total commercial world, advertising, marketing, selling costs and the people are working there compared on a year-over-year basis, GBP 130 million lower.

Amount of the employee cost is temporary in nature. But there's 2 pieces of this, of course. There's a piece called Furlough, which we called out. In quarter 1, the GBP 140 million that will reduce in Q2 as those entitlements that the government are offering reduce but also as we bring a lot more people back into the organization. We had 20,000 people out in April. We had around 10,000 people out on furlough in July. So those monies will be less than half in Q2 and then eliminate to 0 in the second half of the year.

However, I've also mentioned that the absolute number of people within the organization continues to fall. It was down to 37,400 in March, and that will reduce 2% or 3% in the first half and continue probably in the second half as well. So you have an ongoing piece which is underlying, which is lower call it headcount cost and reductions, but we will lose the benefit of the furlough.

Bharat from CLSA. Does the noise around U.K. China political tension impact your business in China, both imports and JV.

Did Ralf actually leave or is he still on the call?

Adrian, the question is does the noise around U.K. China political tensions impact your business in China, both imports and JV?

Yes. But to what extent, right? I mean we built up and rebuilt a super business in China. We expect to continue to be able to do that going forward. Look, there's a lot of political noise. We all know it, we all hear it. We are the biggest Indian-owned company in China, right? So that obviously has an impact also.

Our business model is lean. It's not overexposed. It balances on the fundamentals. And all I can continue to say to you in a stable operating environment, it will continue to be valuable, and it will continue to grow. I can't comment beyond the risk we all see in terms of any point in time and what incidents happen.

If it impacts just like COVID, we'll find a way to absorb it. But of course, we wish for that not to happen. We wish for the duties that are being put in place within different nations are taken away because we all know that economies work better when trade is free. What we wish for may not happen. We'll respond if anything bad happens. In the meantime, a lean, efficient pipeline and a lean efficient business is what we're striving to achieve and making huge progress on.

Sure. Thank you, Jim. Next question is from [Raghunandhan] from Emkay Global. And the question is, company has lost market share in China luxury segment. What are the efforts to regain market share like?

And on JLR employee cost [here] are more reimbursement expected, I think that's what already you have answered. What is the method of calculation?

Third question is on JLR electrification. Are government subsidies expected to support the market? And competition has also been aggressive in launching electric vehicles. Would JLR be able to face competition?

Okay. So let me take them in the order. So the first one, lost share in China and luxury segment. Their volumes are increasing in China. And it's not just a volume game for us, right? I mean we talk about the quality of sale a lot. And the quality of sale is hugely important in China when you look behind the transacting prices, the discounts we've given on our vehicles over the last 12 months have been significantly lower than 12 months earlier, and that means dealers are discounting less. That means they are more profitable and that means variable marketing, we need to offer to get the sale actually closed is less. So we think we've got a good model. We think our model is balanced between quality of sale and absolute number of sales. And you will start to see and you have started to see on a year-over-year basis, it's -- the value that's driven from that type of model.

On employee costs, you've mentioned, I have talked to that. So I won't talk to that.

Again, I think I've talked to the next 1 as well, electrification, government subsidies, market support. We do see an aggressive response when that happens. I've mentioned Netherlands, Norway, U.K., and that will happen again. Should other governments also participate? I mean our view is in this wonderful destination to go to Net 0, governments will need to find a way to invest heavily in infrastructure and incentivizing customers because everybody may want this to happen, but nobody is particularly happy to actually pay for it. Right? So we will take our share. We are taking our share. But other areas like government will need to take their share, particularly if they want to increase the speed of change, which we would be supportive of also.

The other one is a [P&L] question, I think.

The next question is on [P&L CV] subsidization. What is the expectation on time line to be looking for a strategy for financial partners and any color on interest by potential partners?

On the subsidization, you noticed that the Board has approved the scheme that will be filed with the NCLT. And in the coming weeks, we will be doing that. And I -- we are expecting anyway within 9 to 12 months is the kind of time frame for completing the subsidization process. So key priorities for us in the coming months. Partner-wise, I think we speak to a lot of OEMs and as and when something does come through, we will share it.

We have time one last question, I think, Prakash, given we're running out of time?

Yes, please. So I'll take the last question from -- I think next in line is [Abraham Hial from ICIL Central.] Could you please give an idea of how July's demand has been?

And also if we expect pent-up demand to raise Q2 results, where do we see the demand in medium to long term versus pent up demand falls?

And I think we have both in JLR and in here, 1 clear call-out we are making is demand side is highly uncertain. So I think it's very difficult to read at this point and how much of it is spent, how much of it is because of shift to shift away from shared mobility. There are too many hypotheses around that. Our job is to serve demand as and when it comes up. So I think we need to wait for another 3-odd months to see if this pattern actually continues before we're able to start reading this better. So you'll probably have to bear with us till that time.

Sure. Thanks, Balaji. So this concludes the conference from our side. Over to you for closing.

Yes. Thanks all of you. I think I appreciate it's been an intense few questions that have been going through, but it's also an intense quarter for us. So it's good that we are able to spend some time answering the queries and look forward to staying in touch with you guys in the coming quarters as well. Thanks a lot. Stay safe, and speak to you soon.

Thank you very much. On behalf of Tata Motors Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.

Thank you.