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And, yet, all employees at the Tata Motors dealership in Prabhadevi were in attendance early Wednesday this week, the expansive showroom suitably decked up with balloons. Mayank Pareek, head of Tata Motors’ passenger vehicles division was visiting. Pareek insisted on meeting everyone, taking photos with the group, and high-fiving. A couple of Nexons, Tata Motors’ new compact SUV — one in blue, the other in red — were on display at the showroom.
The launch was still a week away, but bookings had just opened. Pareek told the staff how the response was great and how they, the foot soldiers, must do their bit now.The pomp aside, these are difficult times for Tata Motors in India. The company, which also owns marquee global brands Jaguar and Land Rover (JLR), has struggled to be profitable with its Indian businesses. It recorded standalone losses of almost Rs 2,500 crore in 2016-17; the April-June quarter of 2017 also saw a loss of Rs 467 crore. Ravi Pisharody, chief of commercial vehicles (CVs, which are trucks and buses), quit two months ago. Revamp plans put in place by India managing director Guenter Butschek were reversed after a review by the new chairman N Chandrasekaran.
A review of the passenger vehicles (PV) business is on — and is likely to be placed The timing of the Nexon is, therefore, crucial. But there is more. “Nexon is important because it is a high-margin product. It can have a positive impact on profitability,” says Hormazd Sorabjee, editor of Autocar India.
In the Tata Motors universe, the Indian PV business is a small part. Brokerage firms covering Tata Motors focus only on JLR, which accounts for almost 80% (Rs 2,16,381 crore) of the consolidated revenues, with commercial vehicles at 14% (Rs 38,722 crore) and PVs at just 3.4% (Rs 9,442 crore).
Sudip Bandyopadhyay, chairman of brokerage Inditrade, says that as JLR accounts for 90% of the profit of Tata Motors, this is fair. “Today the domestic PV and the CV businesses are effectively a drag on the company’s performance,” he adds. Butschek recently told ET Magazine that CVs are at the core of the company, and the mission is to stem erosion in market share, which had fallen below 50% in fiscal year 2017.
On PVs, he added: “I feel if we get our act right, we have a role to play.” He added that the PV operation has the potential to be ranked at No. 3 or even higher (currently it is No. 5). Naturally, Pareek is keen to get his act together. Earlier in the year, Tata Motors yielded the No. 4 slot to Honda. Maruti, Hyundai and Mahindra make up the top deck. To get closer to the third position, a slew of car launches are planned over the next two years. Unlike, say, in 2015 and before that, Tata Motors is now positioning its new models as something that buyers will like, rather than as a fleet car. Pareek says: “Two years back, half of Tata Motors cars were sold to fleet owners, tourist and taxi customers. Now it is down to 17%.” He adds that the average customer visits 2.6 dealerships before buying a car, and to be able to feature in that 2.6, Tata Motors will have to address the individual’s concerns.
“Only 33% visits end in sales, so the effort is higher, unlike fleet sales where you sell 10-12 cars in one go.” Pareek explains that to be able to cater to the individual customer, the company increased the number of foot soldiers at its 650 sales outlets across India from 4,000 to 10,000. “The test drive is key.” He adds that something else has changed with car buyers in India. The youth of today — 65-70% of buyers — are keen to buy the top variants with all the bells and whistles. The basic version is bought by only 5%.
Not Pound-Foolish Either
Pareek lets on that while the PV business is seeking a licence to spend more, it cannot escape cost-cutting measures. In fact, he says 20 such projects are in operation. One of them is an effort to match demand and supply — to eliminate situations where there are waiting lists on certain cars and then there are ready stocks of models with low demand. The company is also cutting down on the number of platforms on which it builds cars to bring down costs.
A versatile advanced modular platform (AMP) is being developed for 2019 and one more platform is being created that borrows from the Land Rover. These two will replace the six platforms currently in use. Tata Motors today serves only around 59% of the market and Pareek wants to take it up to 95%, filling product gaps, like a premium hatchback or a van.
A proposed collaboration with VW Group — which hasn’t taken off — would have helped fill the gaps faster. Butschek says the company will be open to alliances in future. The Nexon, a bridge product till new cars come up on the AMP, as Sorabjee explains, too is one step in that direction. Tata Motors may have filled a product gap with the Nexon, but the compact SUV segment is a crowded one, with the likes of Renault’s Duster, Hyundai’s Creta and the Maruti Vitara Brezza having made inroads.
Additional reporting by Malini Goyal
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Source : http://auto.economictimes.indiatimes.com/news/passenger-vehicle/cars/how-tata-motors-plans-to-breathe-fresh-life-into-its-passenger-vehicles-portfolio/60717418