Mumbai: Tata Motors Ltd , India’s biggest automaker, has a new strategy to revive car sales from a decade low: the company is promising to buy back your Manza sedan.
The Mumbai-based carmaker said it will guarantee customers 60% of the purchase price after three years on cars they buy in the next two months, according to an email response from the company.
Tata Motors, led by chairman Cyrus Mistry, also cut prices for some of its cars this week by as much as Rs.50,000. The Manza model will be about 8% cheaper.
The plan to repurchase cars shows the owner of Jaguar Land Rover is “desperate” as it has lost share in Asia’s third largest car market to Toyota Motor Corp. and Mahindra and Mahindra Ltd, according to Deepesh Rathore, the India managing director of IHS Automotive. Passenger vehicle sales at the company plunged 70% last month to the lowest in a decade.
“Tata Motors has a big problem in the local car business,” said Juergen Maier, a Vienna-based fund manager at Raiffeisen Capital Management, which oversees about $1.1 billion in emerging-market assets. “Tata Motors needs to get its quality and design right.”
India’s automakers’ association in January lowered its full-year domestic car sales forecast for the third time in six months as slowing economic growth and high interest rates continue to keep buyers from showrooms. February passenger car sales at Tata dropped to 10,613 from 34,832 a year earlier. Deliveries at Maruti Suzuki India Ltd, the nation’s biggest carmaker, fell 9% to 97,955.
Former chairman Ratan Tata hired Karl Slym as managing director from General Motors Co.’s China unit to revive vehicle sales. Slym last month said he plans to build a diesel version of the Nano, the world’s cheapest car, after introducing a new version of the Indica hatchback.
Tata on Wednesday said it partnered with five banks including HSBC Holdings Plc and ICICI Bank Ltd, India’s second largest lender, to offer customers the ability to buy the Nano using credit cards.
Tata Motors’ shares, which have declined 1% this year, rose 3% to Rs.309.4 in Mumbai, the highest since 23 January.
Sales of the company’s trucks, buses and cars at home accounted for 36% of group revenue of Rs.1.66 trillion in the year ended 31 March, down from 43% in 2010, according to data compiled by Bloomberg.
Profit at the Jaguar Land Rover unit, which contributed 74% of Tata Motors’ operating income in the year ended 31 March, declined 25% to £296 million ($449 million) in the three months to 31 December. Tata Motors reported a loss of Rs.460 crore for its Indian business as sales at home dropped 21% to Rs.10,530 crore.
Tata sold 7,485 units of the Indigo and Indigo Manza sedans in the 10 months to January. That’s 6% of Maruti’s DZire sales in the same period.
Maruti sold 131,177 units of its DZire, according to data from the Society of Indian Automobile Manufacturers, or Siam.
Toyota’s sales including utility vehicles rose 6.4% to 133,296 in the 10 months to January.
“I doubt Tata Motors will be able to improve their market share,” said Surjit Singh Arora, an analyst at Prabhudas Lilladher Pvt. Ltd in Mumbai. “Unless they upgrade their platforms, it looks difficult for Tata Motors.”
Maruti has seven versions, including gasoline and diesel options, of its DZire, while Tata sells 17 variants of the Indigo and more than 20 for the Indica, according to the companies’ websites.
“Tata continues to sell old-generation models with the new. This is bad strategy,” said Mahantesh Sabarad, an analyst at Fortune Equity Brokers India Ltd in Mumbai. When Honda Motor Co. or Maruti “introduces a new generation, they phase out the old ones”.
The company’s buyback offer will be valid for cars that haven’t had a major accident and carry a valid insurance policy, according to the email from Tata Motors. The automaker doesn’t plan to extend the repurchase plan, which it says “will surely boost sales”, to other models.
The plan may help Tata see a “dead cat bounce in sales”, Sabarad said. “I don’t expect market share to increase.”