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Business News/ Companies / Tata Motors is now less vulnerable to unpleasant shocks: Guenter Butschek
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Tata Motors is now less vulnerable to unpleasant shocks: Guenter Butschek

Tata Motors is on a much stronger footing now than a year ago, says managing director Guenter Butschek

Tata Motors managing director Guenter Butschek. Photo: Abhijit BhatlekarPremium
Tata Motors managing director Guenter Butschek. Photo: Abhijit Bhatlekar

Guenter Butschek, the 57-year-old managing director of Tata Motors Ltd, has steered the company’s India operations to a profit for the first time in five quarters. But the bigger task that Butschek claims he has achieved is making the company less vulnerable to unpleasant shocks.

“Don’t blame the market for dropping the ball. The best argument for me was that overall market volume dropped but it’s not enough of a reason to trouble your market share," Butschek said in an interview. “Volatility is a fact of life and it is our responsibility to make ourselves as less vulnerable as possible."

To read the full interview click here

Tata Motors’ Indian unit reported a net profit of Rs184 crore in the three months ended 31 December. That helped the owner of British luxury car firm Jaguar Land Rover Plc post a 11-fold jump in its consolidated profit for the quarter. Butschek said Tata Motors is on a much stronger footing now than a year ago.

“The lowering of the break-even point (for the company) is important; if we had been on the same break-even point a year ago... we would’ve been in a much stronger position to face the volatility in the three events of 2016-17," Butschek said, referring to demonetization, the implementation of the goods and services tax (GST) and the court-directed transition to stricter emission standards for vehicles.

Since February 2016, when Butschek took charge, Tata Motors has expanded its market share in the passenger vehicle category by 160 basis points to 6.2%. In the commercial vehicles category, its market share has increased by 130 basis points to 47.5%. A basis point is one-hundredth of a percentage point.

Recounting the tumultuous events of the past year, Butschek said the market suddenly disappeared at the end of June 2017 because there was an expectation that the GST rate for commercial vehicles could be as low as 18%.

Customers were also aware that the transition to Bharat Stage IV (BS-IV) emission norms would lead to higher costs, so they “wanted to wait and see because they could get the BS-IV solution with a tax benefit of a lower GST rate than the BS-III solution".

“Then demonetization happened. Our business is cash-based in the way the trucks are operated and the impact was huge. The detrimental impact of the unprecedented Supreme Court ruling for the transition from BS-III to BS-IV resulted in a record loss-making fiscal 2016-17," he said.

Butschek remains concerned about the larger macroeconomic and regulatory environment, which he believes could delay Tata Motors’ complete turnaround.

Analysts say the firm now needs to increase sales volume and market share.

“Things are on the mend thanks to some traction the company has seen for its products; so, a higher operating leverage is reflecting in the results. We should see better financials especially if their momentum in the commercial vehicle segment continues since the division generates higher profits," said Mahantesh Sabarad, head of retail research at SBI Cap Securities.

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Published: 05 Mar 2018, 12:25 AM IST
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