It is one of the largest revenue drivers for the Tata Group, but Tata Motors has hit bumpy roads in recent times, particularly in the standalone business. In the domestic market, it has lost ground in the its bread and butter truck and bus business, whereas in the passenger vehicle business, while new products have clicked, its still early days to talk of a sustained recovery.
On Tuesday, new chairman N. Chandrasekaran admitted that while the company had faced a challenging market environment, missed opportunities in the market and not executing plans properly was also a reason for Tata Motors losing its way, particularly in the commercial vehicle business.
“On one hand, while we faced a challenging and uncertain environment due the change over to GST, demonetisation and the unexpected Supreme Court ruling on BSIII (Bharat Stage III emission norms) to BSIV migration; on the other hand, the company’s performance also suffered due to sub-optimal execution and market misses,” he said addressing shareholders at the company's 72 annual general meeting.
From a high of close to 60 per cent market share in the CV business five years ago, the company's market share dropped to 44.4 per cent in March this year. In the passenger vehicle business, its market share has slightly improved helped by new launches like the Tiago hatchback, Hexa SUV and Tigor compact sedan, but costs too have increased and the overall standalone business still is loss making.
For the quarter-ended June 30, Tata Motors' standalone sales volumes de-grew 12 per cent to 111,860 units. It reported a loss of Rs 467 crore. Gross debt has also mounted to Rs 19,574 crore as of March 31.
For Chandrasekaran, who took over as the chairman of Tata Sons in February this year, the road map is very clear. He said that while the business environment will remain unpredictable, the clear focus for Tata Motors was to turnaround the domestic business.
“We are working with tremendous urgency in this matter and making an earnest effort to turn profitable,” he tried to assure shareholders, who were unhappy that the company had not paid a dividend last year.
With turnaround high on the agenda, Chandrasekaran says the company must ensure all product launches in the CV business happen within laid down time lines and without delays, the company starts gaining market share and there will be a serious cost improvement plan.
In the passenger vehicle business, its banking on the upcoming launch of Nexon compact SUV to further drive the revival in sales that began with the launch of Tiago ast year.
Tata Motors was for long blamed for not launching new products quicky enough. That may not happen going ahead.
“We are working with renewed focus to make our processes efficient and agile to be able to respond quickly to the market. We are streamlining our end to end visibility of the supply chain. We are also focusing on accelerating the timeline of delivery of new products to the market. The management team led by Guenter (Butschek, its MD and CEO), is working together to deliver a strong execution led operating performance,” added Chandrasekaran.
Tata Motors has planned Rs 4,000 crore investment in new product development, Butschek said earlier. But, at the same time, some of the ambitious projects like its sub-brand TaMo, which had showcased the racecar RaceMo earlier this year, will now take a backseat as the company reallocates resources and priorities.
C. Ramakrishnan, CFO of Tata Motors, said that there was over Rs 1,500 crore in potential for identified profitability improvement just through volume and market share related measures.
“We are focusing on accelerating cost reduction actions across all categories, including material costs and all other expenses to further improve the bottomline,” he said.
Inventory and distribution logistics improvement, customer centricity and improving quality of products, complexity reduction in product portfolio by way of a significant modular platform approach and working on the strategic supplier base, are among the levers the company plans to navigate past the bumpy road.
Market analysts have so far remained bullish on the company, particularly as its luxury Jaguar Land Rover unit remains largely strong. Prayesh Jain analyst at IIFL said that the recent success in the passenger car segment through new model launches was likely to sustain, which would continue to drive revival in the standalone business. The cost cutting measures will provide additional boost to margins, he added, maintaining a “buy” rating on Tata Motors.
