Tata Motors finds task cut out for Iveco turnaround after twin losses

Tata Motors Ltd has taken charge of an Iveco that is losing money. The Italian truckmaker lost €45 million in the July-September quarter, its second quarterly loss this year. It is the first time since Iveco listed in 2022 that it has lost money in two quarters of the same calendar year.

For the nine months to September, the loss widened to €123 million, compared with a €109 million profit a year ago, according to results that Iveco filed in Italy on 3 November. They came just days after Tata completed a 15-month takeover and began folding the two companies together.

The to-do list is long. Tata has to repair Iveco’s earnings while servicing the debt it took on to fund a deal worth more than €3.91 billion. The terms of the offer also stop it from restructuring Iveco right away and require it to keep the truckmaker’s industrial footprint, including several plants, intact.

Investors will be watching for a turnaround plan, which is expected to cover a review of sourcing, lower product development costs and higher combined sales. Iveco chief executive Olof Persson says he expects profit to recover in the December quarter, even though demand for light commercial vehicles is weaker, the economy is uncertain, and the mix of vehicles sold is working against the company.

The company's task mirrors Tata Motors' acquisition of Jaguar Land Rover in 2008, when the British luxury carmaker faced a sharp slowdown in demand following the global financial crisis. The strategy eventually helped JLR return to profitability in two years.

Slow recovery

At a press conference in Turin after taking control of Iveco, Tata Sons chair Natarajan Chandrasekaran said the conglomerate has experience working with global businesses.

“We have run global businesses for a long time. And I've been fortunate to build, manage and grow businesses globally across the world in more than 100 countries,” Chandrasekaran said in response to a question in Turin about Iveco’s plans for its international plants on Tuesday after the completion of the deal.

A weak performance in 2026 follows a slow year for the Italian firm in 2025, in which it saw its profitability more than halve to €233 million, and revenue fall 7% to €13.4 billion.

As per the firm's commentary, the pressure on profitability reflects higher spending on product quality, an unfavourable mix of vehicles sold, pricing pressure, and weaker demand in some markets.

Iveco said its continued quality initiatives, which required additional resources across business units, weighed on profitability. The company said these efforts peaked in the September quarter and would gradually ease, with benefits expected to show up in performance over time.

Analysts at Nomura said in a 4 November note that Iveco's subdued performance and margin pressure reflected a weak European commercial vehicle market and macroeconomic uncertainty. The company's industrial Ebit margin fell to zero in the September quarter from 2.8% in the June quarter.

Nomura noted that Iveco had guided for its Ebit margin to improve from 5.4% in 2024 to 7.5% by 2028, but its own FY27 estimate is now 2.8%, highlighting the gap between the earlier ambition and the current earnings trajectory.

“With the acquisition now completed, we expect integration synergies, including cost efficiencies and sourcing advantages, to support a gradual recovery in profitability over FY28-29,” Kapil Singh, Siddhartha Bera and Gautam Hariani of Nomura wrote.

“Execution of cost optimization initiatives and the pace of earnings recovery remain key monitorables,” they added.

Fix earnings

Concerns about Iveco weighing on Tata Motors were first raised earlier this year. Analysts at Motilal Oswal Financial Services flagged on 30 January a lack of visibility into Iveco’s financials due to uncertainty in the markets it operates in, such as Europe and Latin America.

“Its (Tata Motors) recent acquisition of Iveco would expose it to the ongoing global macro uncertainties, thereby driving a potential de-rating if the demand environment does not improve anytime soon,” analysts wrote in the note.

“Given the lack of visibility in its financials and given that this acquisition will initially be funded with a debt of €3.8 billion, we refrain from giving any incremental value to Iveco at this stage,” the note read.

The turnaround will now fall to Tata Motors, which completed its acquisition of Iveco after a 15-month process.