Tata Motors, the country’s biggest automobile company by revenue, sustained cumulative losses worth Rs 7,200 crore during the last three financial years in domestic business, which mostly fell under the tenure of former Chairman Cyrus Mistry. No wonder that his successor, N Chandrasekaran, has sharpened focus on turning around the company as a part of his group strategy.
Within the company, Chandra’s priority is the domestic business as the luxury brand JLR
is ‘doing well’. “We want to gain in commercial vehicles (CVs)... We want higher growth, higher market share and higher profitability. We are driving them very hard as we have lost all three. We have lost market share very significantly, we have suffered on growth and we have increased the cost structures. We are looking at all three – it’s a big priority and a massive programme is underway to look at each of these aspects,” Chandra told Economic Times
in an interaction.
The company has a 36.51 per cent share in the domestic medium and heavy bus segment while its share in medium and heavy trucks is 51 per cent (during H1, FY18). The share in light CV
(passenger carriers) and goods carrier is 31 per cent and 40 per cent, respectively. Siam data shows the company has lost share in each of these four segments since FY14. For example, the share in medium and heavy trucks was over 58 per cent in FY14. Similarly, the share in LCV (goods carrier) was 49 per cent. From a leader in each of these segments, the company now leads only in medium and heavy trucks. Rivals like Ashok Leyland and M&M have taken away share and emerged leaders in certain segments.
focus is understandable since it brings about 80 per cent of the Rs 49,100 crore standalone revenues (FY17) and will play a critical role in bringing the standalone business back to black. “If I look at the domestic business what is it that is hurting us -- the drop in profitability in CV
and the increase in loss in passenger cars,” Chandra said. He listed debt reduction, rigorous capital allocation, growth revival, market shares and margins of CVs as priorities for the company’s domestic business.
The company is targeting a 5 per cent gain in CV
market share through a host of launches and improvement in retail, especially in micro cities. It is also eyeing an improvement of more than Rs 1,500 crore in the bottom line at a standalone level. Guenter Butschek, chief executive officer and managing director at Tata Motors, referred to CV
as the ‘backbone’ of the company in August and announced investment of Rs 1,500 crore to expand CV
"In CV, we are in process to upgrade old fleet with new power train solutions. We have three main focus areas in CV.
We need to improve our cost position. We have built up cost over the years and it needs to be right sized. This reduction will be across Tata Motors.
Secondly, we will focus on volume and gain market share. From a revenue and profitability point of view its commercial vehicles (medium heavy duty trucks)…it is the focus point. This is the backbone that keeps Tata Motors
going”, Butschek told Business Standard
But the passenger vehicle business, though one-fifth of revenue, is also getting attention. “Our cost structures are out of whack. Every single car and model is losing money. It's important to pick up volumes and try to become profitable”, says Chandra. Recent product launches, while they are doing well in volume, are unlikely to be making money for the company.
Products like the Tiago and Tigor and the recent compact SUV Nexon have all been launched at highly aggressive prices. In the passenger vehicle business, the investment of Rs 2,500 crore will be done on the Advance Modular Platform this year to develop two products.