Aniket PujariThe Turin-based company cut its full-year 2025 guidance for its commercial vehicle and defence business by 82% in January to €60 million from €350-400 million, after an earlier 13% cut in July 2025 from €400-450 million, citing production delays and higher costs in the bus segment and weak performance in previous quarters.
Interestingly, both cuts to the cash-generation forecast follow Tata Motors’ announcement on 30 July of a $4.4 billion deal to buy the truck, bus, and powertrain business of Iveco. The Mumbai-based automaker takes over the operations in the June quarter 2026-27.
However, for now, investors appear to be buying into the Iveco opportunity and the company’s overall performance, as a majority of analysts still see the business delivering long-term value.
Since listing separately on the exchanges in November, the company’s shares have surged by 41%, compared with a 1% gain in the Nifty Auto, suggesting investors are pricing in a bullish case for the company.
Mounting concerns
Analysts at Motilal Oswal Financial Services on 30 January flagged a lack of visibility in 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.
Analysts had begun flagging the Italian company’s volatile performance even before the January cut.
“Iveco’s volatile quarterly Ebit (earnings before interest and tax) trend is an area of concern,” Pramod Amthe of InCred Equities wrote in a 4 January note, highlighting how the company’s Ebit fell from €375 million in the December quarter of 2024-25 to €101 million in the September quarter of 2025-26.
The Indian auto major had to defend the deal even at the time of announcement.
“Given the group’s challenging experience with steelmaker Corus and JLR acquisitions, why do you think this is somewhere Tata Motors can create value?” asked Sonal Gupta, head of research-equities, at HSBC Asset Management India, on 31 July.
Tata Motors did not respond to Mint’s emailed queries.
The company has agreed to acquire the commercial vehicle business of Iveco, backed by the Agnellis, the family behind the Fiat Group, for a total value of $4.4 billion.
The combined Tata Motors and Iveco group would have sales of over 540,000 units and revenue of over $25 billion. Europe would account for half of the combined group’s total sales, followed by 35% in India and the remaining 15% in the Americas.
The deal was announced before the demerger of Tata Motors’ passenger vehicle and commercial vehicle businesses, with the latter listing separately in November.
While the passenger vehicle business gets most of its revenue from JLR, the commercial vehicle entity will get a large share of revenue from the Italian entity.
The twin challenge
Concerns about Iveco weighing on Tata Motors’ performance mirror the challenge faced by its passenger vehicle arm, which has seen its performance suffer because of US tariffs and cybersecurity issues at its UK-based luxury car business, Jaguar Land Rover (JLR).
Tata Motors Passenger Vehicle Ltd’s profitability has been declining year-on-year for two consecutive quarters.
However, some analysts note that the acquisition can deliver medium- to long-term gains and suggest that the Italian business can meet its long-term targets.
“Iveco deal + EU FTA could unlock cross-selling, sourcing synergies (products + components),” analysts at Emkay Global wrote in a 30 January note. “We have built in €17.5 billion revenue by CY28E with FCF of ~€0.8 billion by CY28E, in line with the management guidance,” the note added.
Pramod Kumar, Vedant Kshatriya, and Hemal Bhundia of UBS Securities wrote in a 27 January note that the acquisition will widen the company’s reach across geographies.
“We expect the transaction to be value-accretive for Tata Motors. Given its smaller scale relative to peers, we expect improving trucking volumes in Europe to support margin expansion and bolster cash flows, as the overall demand environment in the region continues to strengthen,” analysts at UBS noted.
In September, Tata Motors held a meeting with analysts from India’s top brokerage houses to lay out its plan for Iveco and how it will look to unlock value from the acquisition. Among the steps, it will aim to reduce the operating expenses of the Italian commercial vehicle maker by leveraging its engineering capabilities and common platforms to lower product development costs.
Moreover, Tata’s review of Iveco’s supply chain highlighted clear opportunities to increase sourcing from Eastern Europe and Asia, which could help reduce costs.
