BackTata’s Zest runs into production roadblock
Auto maker fails to live up to hype as waiting period for the model's popular AMT variant soars to 6 months
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Mumbai/New Delhi: Tata Motors Ltd, India’s largest auto maker by sales, has failed to capitalize on the euphoria generated by Zest, its first launch in the passenger car market after a hiatus of eight years.
The waiting period for the model’s automated manual transmission (AMT) variant has soared to six months. In an interaction with reporters on Monday, Mayank Pareek, president of the passenger car business unit at the firm conceded, “This is not the way we should have gone about it," referring to Tata Motors struggle to increase the production of Zest to meet demand.
To be sure, this is not the first time Tata Motors has failed to capture the initial demand for a new product. A similar situation faced the company after the launch of the Nano in July 2008, billed as the world’s cheapest car, when it found itself staring at a huge pile of bookings of close to 100,000 plus units. At that time, relocation of manufacturing lines from Singur in West Bengal to Sanand in Gujarat had stymied production.
Analysts say Zest can pave the way for a turnaround in volumes only if production-related issues are addressed quickly.
“The Zest is a lot better model in every sense compared with earlier offerings. Unlike the Nano, they have also marketed it well," said Surjit Singh Arora, analyst at Prabhudas Lilladher Pvt. Ltd, a brokerage.
He, however, said that if the company fails to reduce the waiting period in the next two months, “they will commit the same mistake of not living up to the hype". Given the tough competition, buyers might consider models such as Maruti Dzire, Honda Amaze and Hyundai Xcent, he said.
Even as the car market grew 3% in the first seven months of the year starting 1 April, Tata Motors’ sales fell more than 32% to 86,802 units during the same period over a year ago, according to the Society of Indian Automobile Manufacturers (Siam), an industry lobby.
In a bid to resurrect its fortunes in the passenger car segment, where it has been steadily ceding ground to rivals, Tata Motors launched the Zest in August. Since its launch, the firm has delivered 10,000 units and has an order backlog of 6,000.
The waiting is mostly for the AMT variant. Being the only carmaker to offer the technology in a compact sedan segment, the Zest became an instant hit with buyers. However, due to constraints at the supplier, Magnetti Marelli, who is the sole supplier of the gear box, Tata Motors has not been able to produce enough cars.
“This is a golden opportunity. We have to produce what a customer wants. There will be improvement in this regard," said Pareek. “Forecasting is a big art. Most companies err when it comes to forecasting."
The firm will make sure at least a month’s stock is available at the showroom with every new car that it launches from here on, Pareek said. Tata Motors is selling 3,500 units of Zest per month. Had it not been for the supply constraints, it would have sold 5,000, he said.
All manufacturers have gone wrong in estimating the market potential of AMT, according to Pareek. Against the original forecast of 10-20%, the demand is 40%-50%. In the next decade or so, Pareek expects every second car to have AMT. The growing demand, he believes, will prompt other manufacturers to enter the Indian market. Car maker Maruti Suzuki India Ltd, which currently offers AMT on its Alto and Celerio hatchbacks, plans to offer it in other models including the Swift and Wagon R.
Tata Motors also plans to make deeper inroads into rural markets to ramp up sales. Pareek, who’s been on a whirlwind tour of the country since he moved to Tata Motors from Maruti Suzuki in October, said there is a lot of untapped potential in rural markets as Tata Motors has a presence in only 200 of the close to 3,800 tehsils, or sub-districts, and 300-400 of the top 3,000 cities.
As part of its rural strategy, the company will be rolling out new sales formats and bank on targeted marketing that leads to better sales conversion.
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