Turnaround 2.0: Tata Motors bets on new launches, cost-cutting for revival

Tata Motors hopes that rapid product launches, larger footprint and platform synergy will catapult it among the top four

In February 2019, Tata Motors promised "decisive action" to cut costs in its Jaguar Land Rover (JLR) unit and improve cash flow after weak sales at the British luxury car brand led the company to post the biggest-ever quarterly loss (Q3 2018-19) in Indian corporate history.

When it announced results for the fourth quarter last month, things looked much better. Its profit fell less than expected and the automaker said tighter control of expenses and a turnaround at JLR helped it stay the course in the face the economic slowdown at home. “We have finally embedded turnaround into the culture and into the DNA of Tata Motors,” says CEO and MD Guenter Butschek.

So after years of negotiating rough roads, Tata Motors Ltd (TaMo) is finally looking at a less irksome drive, thanks largely to its Turnaround 2.0 strategy, which helped the company address nagging issues such as the lack of new products, weak market activation, pressure on margins, a complex organisation structure and external factors like the implementation of demonetisation, GST, BS-IV and the overall liquidity crunch. 

TaMo is now starting on a new journey — that of becoming the most aspirational Indian automobile brand by 2024.

In April 2018, TaMo kicked off the Turnaround 2.0 process to arrest its losing streak. The focus areas were sales enhancement, rigorous cost reduction and improving production and supply chain efficiencies —all aimed to improve the bottom line. “Win decisively in CV”, “Win sustainably in PV” and “Win proactively in EV” were the key levers of Turnaround 2.0.

The process embraced more than 2,000 people across the organisation. Three things happened immediately. Nearly 14,000 ideas were generated for cost optmisation opportunities in CVs; in PVs, costs came down by half and implementation time by a third. This, in turn, ensured that all product margins jumped by 500 basis points.
 

TaMo also shifted focus from the fleet segment to passenger cars and launched a series of new products, including five in 51 days — a first in the PV industry. Last year, TaMo’s PV sells grew 12.2 per cent, against the overall industry growth of 2.8 per cent. Prior to 2014, TaMo's personal to fleet ratio was 20:80; now with a new range of PVs, the ratio has tilted heavily in favour of the personal segment. 

Mayank Pareek, president, passenger vehicles, Tata Motors, says significant cost reduction was a highlight of TaMo's turnaround strategy. Cost savings in machinery and spares was around 26 per cent, while savings in operations and other fixed costs was 13 per cent. The company deconstructed 14 competitor cars and four Tata Motor cars and introduced nine variants in six months. All this helped TaMo's PV segment to not only outperform the industry for nine quarters, it also achieved EBITDA breakeven in 2018-19 at 0.1 per cent, against -11.4 per cent in 2017-18.

“We will continue to focus on new products and customer service. And of course we continue to focus on rapid cost management,” says Pareek.

So what does the future look like? The company, which is yet to find a place among the top four auto companies, says its efforts are directed at being counted among them. Here the key will be rapid product launches and customer outreach.

TaMo has unveiled a completely new architectural strategy that has modular and flexible characteristics and has the ability to evolve into a range of youthful and agile vehicles in a short development cycle. The first rendition of this strategy was its SUV Harrier. TaMo plans to launch another product in the same platform this fiscal. The soon-to-be-launched Altroz will be its next vehicle on the Alfa platform. "We started launching new products based on our design and safety promise and we have backed them up with innovative marketing programmes," said Pareek.

TaMo's PV outlets have increased to 865 from 400 and will touch 2,000 in the next three years. Geographic footprint and new products are expected to go a long way is revitalising the brand.

In the CV segment, despite regulation changes and growing competition, TaMo's market share rose to 45.10 per cent in 2018-19 and it outpaced industry growth by clocking 17 per cent to 468,692 units in 2018-19 compared to the previous year. New product launches calibrated to the revised axle load norms in M&HCV trucks and tippers, along with the new Ultra and Ace Gold ranges, helped TaMo strengthen its position in the segment.

Girish Wagh, president, CVBU, Tata Motors, says the company will continue to aggressively push its turnaround strategy this fiscal. With the BS-VI norms coming into play in April 2020, TaMo will be "more prudent" with inventory management across platforms. It is planning to reduce CV platforms to 12 from 18, which will help it cut development cost and improve time to market. TaMo added 275-odd new sales and service touch points for CVs last year to take it to over 3,750 across the country. Container workshops and mobile service workshops are also being used to reach customers in remote locations.

To sustain the momentum, TaMo has identified five "angles of attack" — a term frequently used in the airline sector and doesn't surprise coming from Butschek who was COO of Airbus Group SA — that will pivot around products, scale, cost, technology and embracing digital. TaMo also sees synergy across its business units. 
 

Standarisation of vehicle electronics and the unification of data, analytics and security will ensure it is set for the next phase of growth, says the company.