BackTata Motors restructuring commercial vehicles unit
Reorganization involves regrouping vehicles into two groups—those meant for cargo, and those for passengers
Premium(AFP)
Mumbai: Tata Motors Ltd, India’s largest truck and bus maker, is restructuring its commercial vehicles business as it seeks to enhance efficiency and gear up for a pick-up in sales after a two-year lull. The reorganization involves simply regrouping the vehicles into two broad groups—those meant for cargo, and those meant for passengers, according to two people familiar with the company’s plans who asked not to be identified.
Currently, all commercial vehicles are clubbed together.
The move, said one of the two persons cited above, will help the firm sharpen its focus. The restructuring was kicked off a few months ago and will come into effect from 1 April.
In an email response, a Tata Motors spokesperson said: “We have undertaken various new initiatives designed to enhance the company’s competitiveness and we have realigned some of our commercial vehicle business heads to further increase our focus on customer needs with the evolving market."
“This kind of role alignment initiative is part of our continuous plan to respond to an increasingly competitive business environment and macro-economic pressures," she added.
Under the new plan, the company will do away with product segmentation based on vehicle type and mass, and replace it with a simpler segmentation that is broadly based on the usage, said the second person cited above.
“This will allow the company to look at the market from the user’s point of view," he added.
Unlike passenger cars, which roll off the assembly line in a fully built form and have high levels of standardization, only the chassis is standardized in trucks and buses. The building of body on the chassis, which is typically outsourced by a truck maker to vendors, is guided by the requirement of buyers, said the first person, citing the example of the mini truck Ace that can be adapted for multiple applications—from transporting milk and vegetables to consumer durables.
“The high level of customization in large and small trucks have added to the complexity. The recent move, therefore, will help in bringing more efficiency," he said.
At a later stage, the reorganization will also lead to changes at the dealership level, albeit in a phased manner.
Analysts said the exercise reflects increasing competition in the commercial vehicle business and hopes of a pick-up in demand.
The increasing competition in the market and emergence of newer sub-segments over the last five years or so has changed the dynamics of trucking, said Subrata Ray, an analyst at Icra Research.
“The restructuring will help the company stay ahead of the curve and connect better with customers," said Ray, adding that the average truck buyer has evolved and wants much more than just mileage.
The changes in the commercial vehicles business, a cash cow for Tata Motors, come against the backdrop of a resurgence in sales. After taking a severe knock for more than two years due to delayed infrastructure projects and a sluggish economy, sales of medium- and heavy-duty trucks have been rising since June 2014.
In February, sales expanded 37.63% to 22,533 units, according to the Society of Indian Automobile Manufacturers (Siam). Overall trucks and bus sales also advanced 10.13%—the fastest in three years—to 52,843 units, Siam said on Tuesday.
From a fleet operator’s perspective, the operating environment over the past six-nine months has also stabilized owing to a sharp drop in diesel rates and relatively firm freight rates, implying improvement in their cash flows, said Icra Research in a 5 March report.
A survey of fleet operators in the northern and western markets suggests that fleet utilization levels are gradually improving on back of higher load availability from some of the key freight generating sectors such as automobiles, cement and other general industries, the rating agency said. Icra expects the medium and heavy commercial vehicle segment to grow 12-14% in fiscal 2015-16, while light commercial vehicles are expected to see a moderate 4-6% growth.
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