New cars put Tata Motors on turnaround road

Have the efforts of Tata Motors begun to yield results?

The automaker, which was reporting depressed numbers for many years and banking on its overseas arm JLR to provide the impetus, impressed in the second quarter by outpacing the industry growth.

Consistently improving its month on month sales, the company notched its highest passenger (PV) and commercial vehicle sales in September, since November 2012 and June 2014, respectively.

The performance came just four months after parent Tata Sons chairman N Chandrasekaran raised serious concerns over the falling market share of the company in May.

"Overall delays in new product launches as well as lack of adequate responsiveness to the competitive environment and an unsustainable cost structure have contributed to this performance." Chandrasekaran had said in Tata Motors annual report.

However, with the turnaround plan in the works, things seem to be working for the home-grown company.

Sales numbers reveal that Tata Motors's upclimb began in January this year when it sold a total of 46,349 units followed by 47,574 and 57145 units, respectively in February and March.

While April was a dampener on account of the Supreme Court ban on BS-III vehicle, sales recovered to 38,361, 40,358, 46,216, 48,988, units in May, June, July and August, eventually peaking in September with 58,117 units.

According to the company dealers, new products like Tiago, Tigor and Hexa helped drive sales momentum in the PV business, while the recently-launched Tata Nexon has given the sales team to back their bets on.

In the utility segment, sales picked up from 2,307 units in January to 5,144 units in October.

In passenger cars, sales grew from 10,600 in January to 12,238 in September.

"The recent car launches have improved the brand perception about the products company comes out with," said a Mumbai-based dealer.

Tata Motors, which embarked on an aggressive growth strategy to regain lost market share in the medium and heavy commercial vehicle (MHCV) segment, is putting similar efforts to gain leadership position in the LCV market.

Analysts said Tata Motors registered a strong topline growth in medium & heavy commercial vehicles (MHCV) , intermediate & light commercial vehicle (ILCV) , small commercial vehicle (SCV) and pick-ups, complemented by favourable product mix and accelerated cost reduction efforts.

The MHCV numbers grew from 13849 units in January to 15,449 units in September. The LCV sales grew from 17,741 in January to 21,230 in September.

The company plans to launch at least 10 new products in the CV segment across all the categories.

Girish Wagh, head - commercial vehicle division, had said the CV business market share grew 1.7% (year-on-year) and 3.9% (quarter on quarter) on the back of newly-launched products, increased acceptance of selective catalytic reduction (SCR) technology, improved stakeholders' engagement and aggressive market activation. "Government funding in infrastructure development and restrictions on overloading with a higher demand for high-tonnage vehicles also helped to push the sales. The renewed government spending for infrastructure projects would help in pushing the sales of tipper vehicles while the completion of the project would give rise to demand for other kinds of vehicles" said Wagh.

The company executives said the production had to be revamped by about 70% to meet the demand, mainly in the CV segment. Industry reports suggest during the first half of this fiscal, Tata Motors has been able to make some dent in rivals, which include Mahindra & Mahindra (M&M), Ashok Leyland and others.

Exports, meanwhile, saw a mixed performance sales from January to October at 2,921, 4,895, 5,836, 2,128, 3,900, 3,504, 3,441, 3,082, 4,152, 4,311 units respectively. The company is also said to be pushing exports as they provide a cushion when domestic market gets tough.

Abdul Majeed, Partner, Price Waterhouse said that revamping the product portfolio and working on the distribution along with customer experience is the key to success. The more the company work on these areas considering the customer changing preference, it would certainly help to consolidate the market share.

Not to be left behind in the new technologies, Tata Motors is also betting on alternative fuels and is said to be making concept models of self-driven buses, hydrogen run buses among others at its plant in Chakan. The company recently surprised everyone when it won the bid to supply electric buses to state-owned Energy Efficiency Services Ltd (EESL) by offering it at very aggressive prices.

As part of its turnaround plan, Tata Motors is aiming to be among the top three vehicle manufacturers in India by 2019. It is has 'accelerated' plan with frequent new launches, newer technologies, cost-cutting measures, enhanced stakeholder engagement and aggressive market activation.

However, months after the initiative were launched, a few were rolled back, fuelling talk in the media that Guenter Butschek, MD & CEO and Chandrasekaran were not on the same page, a charge strongly denied by the company.

Commenting on the improving situation during the announcement of second quarter results, Butschek said, "After a challenging first quarter, Tata Motors has demonstrated impressive results with month-on-month growth in sales and market share, enabled by a slew of new product launches and customer centric initiatives. With our turnaround plan in full action, we are seeing encouraging results and we will continue to drive sustainable profitable growth to meet our future aspirations."