Tata Motors' Cyrus Mistry predicts another tough year

Written by Rachit Vats | Mumbai | Updated: Aug 1 2014, 18:45pm hrs
Tata MotorsTata Motors will be spending Rs 3,500-4,000 crore each year over the next three to four years towards capital expenditure.
Tata Motors, which has been struggling in the domestic passenger and commercial vehicle market, is likely to find the going difficult in FY15 as well, chairman Cyrus Mistry said.

The carmaker, part of the salt-to-software Tata Group, will be spending Rs 3,500-4,000 crore each year over the next three to four years towards capital expenditure, Mistry said at the companys annual general meeting held in Mumbai on Thursday. Jaguar Land Rover (JLR), the British luxury carmaker that Tata Motors acquired in 2008, will incur a capital expenditure of around 3.5-3.7 billion pounds this fiscal.

We accept that the India business has not been doing well and FY15 is going to be tough as well, Cyrus Mistry told shareholders.

A slowdown in the economy that impacted demand for passenger and commercial vehicles, along with stiffer competition from rivals like Mahindra and Mahindra and Honda Cars India, led Tata Motors market share and profitability to fall over the last two years.

Tata Motors has not done well in the domestic market, though a lot of work has already been done and we will see the intensity of product launches go up from here, Cyrus Mistry said. We at Tata Motors have to go through a transformational process to come back in the game.

Tata Motors reported a net profit of Rs 334 crore in FY14, marginally up from the year- ago period on a standalone basis. The company's net sales declined 23.4% to Rs 34,288 crore during the period.

The company expects its new offerings like the Zest, an entry-level sedan, and Bolt, a hatchback to revive its fortunes in the domestic passenger car market. Mistry said that the Zest would be launched in August.

The company will also significantly step up its research and development (R&D) expenditure to come up with new and more advanced offerings for the Indian market, Mistry said.

In FY14, Tata Motors spent Rs 2,144 crore on R&D activities, 22% higher compared to the year earlier. In FY13, the company's R&D expenses rose only 13% to Rs 1,759 crore. Even at JLR, R&D investment has been going up significantly. In FY14, JLRs R&D expenditure rose 32% to Rs 13,274 crore.

Mistry emphasized on the fact that the new product line-up that Tata Motors was working with the intention of launching new products every year would help the company regain market share.

On July 29, Mistry had told senior employees of the conglomerate at an internal conference that his ambition was to make the Tata Group one of the 25 largest in the world by market value in the next decade.