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Tata Motors Saga Part 3 – The uprise and changing strategies

Tata Motors Saga Part 3 – The uprise and changing strategies

Published on 26 July 2021 Views 291 Comments 2

As we all now know that over the past decade or so, the one lakh crore auto giant has seen its fortunes tumble in the Indian market, even raining questions about its significance and relevance in the country’s $104 billion automobile sector. However, Tata Motors (TAMO) is gearing up for a roaring return and is evident from the recent numbers.

From a meagre share of 4.6% in 2016, and 4.8% in 2020, Tata Motors is at present India’s third-largest carmaker, boasting of a market share in excess 9% in the world’s fourth-largest automobile market. In FY21 alone, TAMO sold 222,025 units of PVs, a 69% growth vs. 2018. Surprisingly, the country’s Passenger Vehicles (PV) sales in the FY21 fiscal tumbled by 6.2%. In April 21, the company accounted for 9.16% of the domestic market, according to the FADA (Federation of Automobile Dealers Association).


Incidentally, this change of fortunes of TAMO has come after almost close to two decades of sloppy ride and dwindling sales especially in the PV segment. Tata Motors which made iconic vehicles such as Indica, Safari and Sumo in the early 2000s, had fallen out of sorts and out of the buying radar of customers & auto enthusiasts alike. In the past 2 decades, Indian car market has become very competitive. The 2nd gen cars that replaced the likes of Sumo & Indica received a lacklustre response from the auto community. This, along with new management team with N Chandra as the new Tata group head, forced the top bosses to go back to the drawing board to plug in the gaps and lay out a future strategy to resurrect their PV segment.

Chandra was quoted saying, “The commitment of the leadership and the board to the passenger vehicle business was never in question, and it was unfortunate that the second generation (of vehicles) did not work. We knew if we hit the sweet spots of the market, it will work. There was a phase we had to go through, and it was a time we had to make sure that we're never forgotten in the market.”

 

So eventually, what is fuelling this new growth in TAMO?

The turnaround in the growth strategy is mainly because of the growth in its new PV segment which now they consider revenue centre. TAMO calls it, their New Forever platform which essentially brings on board design improvements, enhanced driving experience along with high safety standards coupled with engine efficiencies.

The Nexon, Harrier & Altroz launched in 2017, 2018 and 2019 respectively, contributed around 60% of the sales in the last fiscal. Harrier and Altroz were designed on the Alfa & Omega platforms, respectively. The two platforms marked a big shift in the company’s usual practice of developing specific platforms for every model. Having just two broader platforms helped streamline production and reduced manufacturing overheads. Capacity utilisation, risk reduction, improving vehicle reliability were other benefits of this strategy. Omega platform was based on the successful SUV Discovery model, owned by Tata Motor’s JLR.

Much of the turnaround credit also goes to the company’s CEO Guenter Butschek, who joined the TAMO in early 2016. In Jan 2016, Tata Motors sold only 10,728 units of PVs in the India. Within a year of his on boarding, the company sold 149,420 units of PVs a year. That grew to 172,504 in 2017 and 210,200 in 2018. By 2019, the company closed the year at 231,572.

Safety which was a big miss in the Nano days was made a top priority. In 2018, Tata Nexon, became the first made-in-India, sold-in-India car to achieve Global NCAP’s coveted five-star crash test rating. It was followed by the Altroz, which in 2020 became the second car from the TAMO stable to win five stars in the ratings.

PV story is not only limited to production enhancements. At the dealer and consumer end as well, TAMO has been aggressive with simplification and digitising of customer journeys and by offering a slew of car financing options with low EMIs, longer tenures, and up to 100% on-road funding. This implied that Tata Motors dealers have cars starting from 5 lakhs to 20 lakhs INR, thus improving the mix and making it sustainable for the dealer. They are also focussing on the EV ride, with their Nexon EV becoming bestseller in the EV segment driving the growth of EVs in the country.

Apart from this, TAMO has also been swift in discontinuing cars that were not doing well in the market. Tata Hexa launched in January 2017 was discontinued in February 2020, in just three years. About nine old models namely Sumo, Safari, Indica, Indigo, Zest, Nano, Aria, & Bolt were discontinued after 2016.

One of the interesting initiative that Tata Motors has adopted recently is that it has taken down umbrella Tata branding. Here the product is the hero, not the brand or company. Customers are buying Nexon, not Tata Nexon. Even the IPL hoardings also had Altroz everywhere and Tata name was shed.

The results have started to come due to these initiatives. During the January-March of FY21, it posted a bottom line of 1,646 cr INR on a standalone basis, vs. a loss of 4,871 cr INR in the year ago period. Revenues also more than doubled to 20,045 cr INR during the same period on a standalone basis.


One of the interesting initiative that Tata Motors has adopted recently is that it has taken down umbrella Tata branding. Here the product is the hero, not the brand or company. Customers are buying Nexon, not Tata Nexon. Even the IPL hoardings also had Altroz everywhere and Tata name was shed.

The results have started to come due to these initiatives. During the January-March of FY21, it posted a bottom line of 1,646 cr INR on a standalone basis, vs. a loss of 4,871 cr INR in the year ago period. Revenues also more than doubled to 20,045 cr INR during the same period on a standalone basis.

What’s the Road Ahead then after the turnaround steam loses momentum?

JLR's restructuring efforts and its solid growth in China, as well as the recovery in other key international markets such as EU and America over the coming quarters and fiscals, will improve its profits and leverage situation

The company is expecting the New Safari, Gravitas and HBX to be launched later in 2021 along different variants across its existing portfolio of Altroz, Nexon & Harrier. This will position TAMO in every segment across hatchback, sedans and SUVs, which should help it to further strengthen its market position as well as market share.

The company is now looking to spin off its PV business into a separate subsidiary to venture at strategic partnerships and alliances as it looks to its next phase of growth in the new decade. This will potentially enable PV business to have access to products, architectures, powertrains, new-age technologies, and capital through strategic partnerships.

You can read Part 1 and Part 2 of this Tata Motor Series here:

  1. Part 1 – The turnaround story of Jaguar Land Rover
  2. Part 2 - Struggles with JLR & the failed dream of a people’s car
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