New models, Lionel Messi fail to revive Tata Motors’s fortunes
Barring Tata Tiago, Tata Motors’s new car launches, including Tigor, Nexon and Hexa have failed to match up to leaders in their respective segments
New Delhi: In the last two years, Tata Motors Ltd has revamped its product portfolio, contracted football superstar Lionel Messi as its brand ambassador, improved dealer relations and worked relentlessly on improving customer service. Despite that, only five of every 100 Indian car buyers choose a Tata Motors product, a harsh reality for the Indian company led by chief executive Guenter Butschek, who was previously chief operating officer at Airbus Group SA and a Daimler AG veteran.
According to data provided by the Society of Indian Automobile Manufacturers, or Siam, market share of the company during April-October period stood at 5.12%, an increase of 11 basis points over the year ago period.
One basis point is one-hundredth of a percentage point.
During the period, Tata Motors sold just 15,930 units of Tigor as against the segment leader Maruti Suzuki’s Dzire that sold 107,515 units; and 8,055 units of Hexa as against the segment leader Toyota’s Innova that sold 41,410 units.
The newly introduced compact utility vehicle Nexon has not had an enthusiastic start. Launched just before the festival season, it sold 5,871 units in September and October. The outlier, of course, has been the hatchback Tiago.
When Tata Motors launched Tiago in 2016, it was expected to be the product that would kick start the turnaround of the company’s ailing passenger vehicle business unit. It was a runaway success and still continues to sell more than 6,000 units every month.
So, is the company headed into the direction where it will largely be a one-car wonder on the lines of its peers such as Ford India Pvt. Ltd, which has a hot seller in EcoSport, and Renault India Pvt. Ltd that sells Kwid? To be sure, Tata commanded 14% market share in 2010-11 and was the country’s second-largest car maker after Maruti Suzuki India Ltd.
According to Abdul Majeed, partner and national auto practice leader at PwC, Tata Motors needs to do “something much more than introducing new products”.
According to him, the onus is now on the quality of customer service and after-sales service.
“It may not happen overnight and we also cannot expect most of the models to do well,” Majeed said.
A Tata Motors spokesperson did not respond to queries mailed to him on Wednesday.
Sure, the company may still be grappling with the legacy issues and two years could be too short a time frame to solve all its problems. Anil Sharma, principal analyst at IHS Markit, says Tata Motors has recovered some ground, even as that does not get reflected in numbers. “Earlier, Tata Motor vehicles never used to make it to the list of 4-5 cars that a potential buyer compiles before he or she makes a purchase. Now buyers have started to consider Tata products. This is a positive development,” Sharma said.
According to Deepesh Rathore, co-founder of London-based Emerging Markets Automotive Advisors, the company should continue to improve its product quality. “Though it has improved from the past but it’s certainly not enough. Also they launched four products in quick succession. So all these products will age together. The strategy should be to maintain the product life cycle effectively now that they don’t have any new products after the Nexon,” Rathore said.
In an analyst call after its September quarter earnings, Tata Motors said that its efforts to turnaround business on a standalone basis would be built on three pillars: filling of product gaps, cost reduction and supply-chain consolidation.
“TTMT commenced cost reduction in India operations a few months ago by reducing organisation hierarchies and optimising products. This initiative will continue ahead and management is targeting a reduction of ~Rs600 crore, from both the employee and capacity utilisation angles. The cost cutting drive is to achieve the company’s vision of making the company profitable within 6-9 months (standalone estimates currently model a return to profitability only in FY20),” BoBCaps Equity Research said in a note to its investors on 10 November. Indeed, the company has shown its intention to leave a mark in the marketplace, especially when it outbid India’s only seller of electric vehicles Mahindra and Mahindra Ltd when the Indian government came out with a tender to procure 10,000 electric vehicles.
Tata Motors quoted the lowest price of Rs10.16 lakh exclusive of the goods and services tax (GST) in the bidding. The vehicle will be provided to EESL for Rs11.2 lakh, which will be inclusive of GST and a comprehensive five-year warranty, which is 25% below the current retail price of a similar e-car with three-year warranty, according to EESL.
Later, Mahindra matched Tata Motors’s bids and will supply 150 cars to the government but its MD Pawan Goenka admitted that his company won’t be making any money on these vehicles.
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