Tata Motors, which has underperformed compared to the broader auto pack for a considerable period, has recently witnessed strong buying interest over the past four trading sessions. The stock is currently trading around the 700-rupee mark, nearly 40 percent lower than its all-time high of around Rs 1180 recorded in July 2024. Interestingly, the stock has now posted gains for six consecutive sessions, sparking renewed interest among investors.
One of the key drivers behind this momentum is the company’s plan to re-enter the South African market after a gap of six years. Tata Motors had wound up its operations in South Africa back in 2017, primarily in the commercial vehicle segment, though it maintained a limited presence. The company is now preparing for a comprehensive re-entry with a strong focus on passenger vehicles.
South Africa holds strategic importance for Tata Motors as it is a market where small and mid-sized cars dominate, unlike luxury vehicles which have relatively limited demand. To strengthen its presence, Tata Motors has entered into an exclusive tie-up with the leading passenger vehicle retailer in South Africa. The collaboration will not only cover product sales but will also extend to building a local ecosystem with a focus on sales distribution, technician training, and service support.
This move also signals Tata Motors’ renewed focus on exports. Unlike many of its peers, Tata Motors has historically been more concentrated on the domestic market, with relatively limited overseas exposure. Its earlier exports were primarily directed toward countries like Nepal, Bhutan, Sri Lanka, and Mauritius.
By re-entering South Africa, the company aims to expand its global footprint in a competitive market already occupied by players such as Maruti Suzuki (under the Suzuki branding), Mahindra & Mahindra, Hyundai, and Nissan. Notably, Mahindra & Mahindra reported its highest-ever sales in South Africa in FY25, highlighting the market’s growth potential.
Alongside this development, overall sentiment in the Indian auto sector has turned positive, thanks to the ongoing buzz around a potential GST reduction. If implemented, a lower GST slab would benefit automakers across the board, particularly those focused on the entry-level segment. This policy expectation has added to the sector-wide optimism.
From a valuation perspective, Tata Motors also stands out as an attractive pick. While the industry average price-to-earnings (P/E) ratio hovers between 19x to 21x, Tata Motors trades at a much lower multiple of around 11.9x. In comparison, Maruti is valued at 30.6x, Mahindra & Mahindra at 33.6x, Bajaj Auto at 32.2x, and Hyundai at an even higher 38x. These numbers reflect Tata Motors’ relative undervaluation and make the stock appealing to value-conscious investors.
The combination of attractive valuations, improving market sentiment, and the company’s strategic South African re-entry has triggered strong buying interest in Tata Motors. While challenges remain, particularly in regaining market share in a competitive global environment, the developments mark an important step in the company’s journey to reposition itself on the international stage.
