Firm offers discounts as young buyers give its new cars a miss in favour of models from rival companies
Mumbai: Irfaan Ahmed, 35, a marketing executive at a Mumbai-based firm, is looking to replace his eight-year-old Hyundai Getz with a new premium hatchback. Having shortlisted the Maruti Suzuki Swift, the Hyundai Grand i10 and the TataBolt, Ahmed test-drove all three and is most likely to buy either a Swift or a Grand i10.
Ask him the reason for ruling out the Bolt and he struggles to find one.
“It drives really well and the features are impressive. But somehow… am not sure. Perhaps it’s the brand perception. I would rather go with the tried and tested," he said after some prodding.
With young buyers like Ahmed giving the Bolt a miss in favour of models from rival companies, Tata Motors Ltd is offering an exchange offer and a cash discount on the hatchback, which has been in the market for just over four months. The offer that has been running since March gives the buyer savings of up to ₹ 45,000, depending on the choice of variant.
While discounts have become the norm in a weak market, car makers usually refrain from offering them in the first six to 12 months of a model’s launch, unless the response to the new model is tepid.
Asked about the rationale behind and the duration of the offer, a Tata Motors spokesperson said that customer offerings do not depend on the period after the launch but on market dynamics and the segment scenario.
“This is an intensely competitive segment and all brands are currently offering them. As always, we offer benefits from time to time in various parts of the country depending on the situation. And the response is in line with expectation," she said in an email response.
To be sure, the launch of new models, crucial to its turnaround strategy in the passenger vehicle market, has helped Tata Motors regain some ground. In fiscal 2014-15, the company’s passenger car sales rose 2% to 109,470 units. This was after sales plunged by a record 38% in 2013-14 from a year ago, according to the Society of Indian Automobile Manufacturers, an industry lobby.
Tata Motors launched the Zest on 12 August 2014 and the Bolt on 23 January 2015. With prices ranging from ₹ 4.64 lakh to ₹ 5.75 lakh (for the petrol variant), the Bolt boasts of several features, including a multi-mode drive and high-end infotainment systems, introduced in a model in this segment for the first time.
Still, sales of the Bolt average only 1,500-1,600 units a month, which compares poorly with market leaders. While Maruti Suzuki India Ltd’s Swift sells 16,000-odd units per month, the Hyundai Grand i10 and Elite i20—the second and third highest selling models in the segment—sell 8,260 units and 7,166 units, respectively. The Zest averages 2,500 units a month.
Some experts, such as Santosh Desai, managing director and chief executive at Futurebrands Consulting, a brand consulting firm, feel the issue for Tata Motors is the brand rather than the product.
“The issue is not about the product any more, as much it is about the brand. They have been really struggling as the consumers are not willing to give them the benefit of the doubt," said Desai, adding that the company needs a compelling strategy to tackle the negative perception around Tata Motors’ passenger car offerings.
However, dealers for Tata Motors blame the weak response on the relatively high pricing of the Bolt.
“It’s critical to price a model competitively at the first go. It doesn’t help if you reduce the price or offer discounts later," said a Mumbai-based dealer, declining to be identified.
An analyst at a domestic brokerage, who asked not to be named, said that Tata Motors may have tried to position the model as a premium one to appeal to young urban buyers.
“It seems to have backfired," said the analyst, adding that, historically, Tata Motors has had a low-price advantage but that this time it chose to price the model on par with the competition.
The ex-showroom price (in Mumbai) of both the Maruti Swift Lxi and the Hyundai Grand i10 (base variants) is ₹ 4.83 lakh.
Rejecting the criticism of its pricing, the Tata Motors spokesperson said, “In Bolt, we have offered much higher value to the customer compared to the competition at the same price." She added that the model offers several class-leading features which have been appreciated by customers.
The new offerings, she added, have helped the company’s passenger vehicle business grow in the last four months. In April 2015, it expanded by 37%, the highest growth reported in the month in the industry, albeit on a low base.