Tata Motors looks at unusual routes to boost demand

Also says it expects a fall in interest rates by September

Weak domestic demand and a slump in the export market has forced the country’s largest manufacturer of commercial vehicles, Tata Motors, to look at unusual factors for demand revival such as vehicle emission norms and depreciation benefits.

The company, which gets 60 per cent of its revenues from the commercial vehicle (CV) segment, witnessed a drastic erosion in profits during the past financial year following the massive slump in offtakes.

In April this year, a notification issued by the Central Board of Direct Taxes (CBDT) allowed truck owners to claim 50 per cent depreciation for vehicles bought and put to use before October 1. CBDT had extended the original three-month time frame that got over on March 31.

Ravi Pisharody, vice-president (sales and marketing), commercial vehicles, Tata Motors, said, “Although there hasn’t been much of a change in the demand for heavy commercial vehicles, we expect factors like depreciation benefit announced by the government and the new vehicle emission norms to push sales.”

From April 1 next year, India will upgrade to Bharat Stage IV (BS IV) emission norms, equivalent to Euro IV, from BS III at the moment. There could be a slight rise in prices of vehicles, leading to preponement of purchases by customers.

“We see depreciation and emission norms driving demand this year,” added Pisharody.

Tata Motors is banking heavily on its new product in the CV space, the World Truck, to drive demand and support margins. The company is still to decide how to price the multi-tonne load carrying product, but sources say it will be at least 10-20 per cent cheaper than its competitors.

Tata Motors, which controls 60 per cent of the CV market, also said that high lending rates to CV buyers has continuously impacted demand. From the single-digit lows of 2006-07, banks had hiked interest rates to 22-25 per cent during the third quarter of the last financial year.

R Ramakrishnan, head - sales and marketing, medium and heavy trucks, said, “Interest rate levels are far from being in the comfortable zone at the moment. We remain optimistic at any reduction in rates from the new government. We expect a fall in rates by September-October.”

The heavy CV (goods) segment, which depends on sectors like infrastructure, mining and construction, among others, bore the brunt of the slowdown recently, when sales dropped to less than 5,000 units a month as compared to the usual 25,000 units.

As the name suggests, the World Truck is targeted at international markets with focus pockets like South Africa, Russia, Turkey and the Saarc countries. The company will officially launch the vehicle in the second quarter of the year.

It will be produced in Jamshedpur as well as the company’s South Korean plant operated by its 100 per cent subsidiary company, Tata Daewoo Commercial Vehicle (TDCV). Apart from the World Truck, the company will also launch new variants of the Ace, a 1-tonne, four-wheeled cargo vehicle.