While the attention of many global auto makers has only recently turned to Tata Motors Ltd’s ambitious Rs1 lakh car project, chairman Ratan Tata appears to have long anticipated that the project will be a high-stakes challenge for his company.
“Rightly or wrongly, there has been a great deal of attention to the small car—the Rs1 lakh car. It is exceedingly important that the product does not slip,” said Tata. “A delay in introducing that will, in fact, increase the challenge that we have.”
Tata exhorted his employees as part of his annual Lake House address here back in April. Excerpts from the speech were later circulated to all employees of the company in Darpan, the company’s in-house magazine.
Despite a lot of attention to the Rs1 lakh car, Tata’s comments haven’t received a lot of attention so far.
The domestic and global auto industry has been keenly watching the development of the company’s ultra-economy car, which is expected to be launched sometime next year and sell at about $2,500 (Rs1.01 lakh), half the cost of the cheapest car currently on Indian roads, the Maruti 800.
The small car is Tata’s dream project. The project has had its share of teething troubles, noticeably at its flagship manufacturing facility at Singur, West Bengal, where farmers have protested the acquisition of land for the project.
In his address, Tata told employees that one of the big challenges before the company will be to accelerate new product introduction into the market, especially in the passenger car business where growth has typically been triggered by new products.
Tata also touched on another concern about the company’s products: quality. A number of problems with new products including the first passenger car from the group, the Indica, a few years ago, had left the company with a bit of a dented reputation.
With a string of products scheduled to hit the market before the small car next year, Tata underlined the quality message and the importance of staying ahead of deadlines.
“We have other products that precede the small car and they need to come out when they are supposed to come out, they need to come out right the first time,” he said. “We need to kill the reputation we have gained, I think increasingly wrongly now,” Tata said.
“We need to do this right the first time. The products that we put into the market need to be designed and produced reliably and they need to have the customer’s confidence in that regard.”
“The Indica and Safari models came under lot of criticism because there were several quality issues, which took several months of work to resolve and left a lot of cust-omers unhappy with their purchases,” concedes one Tata Motors official who didn’t want to be named given that this remains a sore point inside the firm.
“But over the years, the chairman has been repeatedly talking quality and reliability in our products and that has begun to make a difference. Also, with so much competition in the market, we have to ensure that our products have to match up.”
Since Tata spoke, sales of all vehicles in Asia’s fourth largest automotive market have become somewhat sluggish, compared with previous years, due to a variety of reasons, including rising interest rates.
As a result, vehicle makers are offering a lot of incentives to buyers even as they make sure that quality and customer satisfaction standards areexceeded.
Tata congratulated his workforce for a “tremendous achievement” in selling almost 600,000 units, but also pointed out that the company should not have slipped on the export front “as badly as we have”, in the last fiscal. Tata urged the company to overcome the constraints in the domestic market by meeting targets on exports.
“We cannot go into export markets and go out and in and out, based on issues that may affect us domestically,” he said. “We have built a very credible position in some countries for our products. We need to build on that… We need to supply spares and support for those products with as much vigour as we are trying to do in India.”
Noting that this is one of the challenges facing the company this year, Tata said: “I think we should be sad at the slippages that we have had in the export market. So we have some lessons to learn there.”
Tata Motors’ total sales in 2006-07, including exports, were 580,280 units, the highest ever, with a 28% growth over the 454,129 units sold in the year before. Commercial vehicle sales in the domestic market increased 39% to 298,586 units, their highest ever, while passenger vehicle sales also posted record sales of 228,220 units.
Tata also called on Tata Motors employees to rise to the challenge to not just make a statement in the domestic market but also establish itself “reputably with great pride in other markets, like no other Indian company has so far.”
“We have faced euphoric positions earlier, we have faced humiliating positions and acquitted ourselves with dignity and pride,” he said.
“We have set ourselves a path of growth… ability to grow and design products internally. Let us continue on this path. Not a bubble of excellence, not a bubble of growth, but continued and sustained activity so that we are looked at as a company that is growing on a sustained basis.”
Tata touched on the troubles of other auto giants around the world, such as General Motors Ltd and Ford Motor Co. “All around us in the world, we see automotive companies that, in fact, once could never have conceived would be in trouble, but they are in trouble today,” he said.
“So, we need to recognize and be humble that those things can happen and they will happen if we allow things to drift, even a little bit, or take our eye off the ball.”