No one can blame Tata Motors for not trying. Since early 2016, the automaker has launched four new-generation models—Tiago, Tigor, Hexa and Nexon—of which two have shown good promise. The compact car, Tiago, has been the best bet so far, slipping in and out of the list of top 10 models in the country since its launch. Compact SUV Nexon is the other car getting positive reviews. Unfortunately, even these two models have not been enough to move the needle for the company.
Automakers need at least one or two runaway successes to hit the high road, and Tata Motors hasn’t been able to produce even one in the past five to six years. While it’s bestseller Tiago clocks a respectable 6,000-7,000 units per month, it is still some distance away from challenging other compacts like Maruti’s successful Swift (15,000 units) or its Celerio (8,000-10,000) or Hyundai’s i10 (12,000).
In fact, none of Tata Motors’ models rank among the top three in their categories. Even the much raved about SUV, the Nexon, sells only about 5,000 units a month compared to Maruti’s Vitarra Brezza’s 12,000, Hyundai Creta’s 9,000 and even Ford Ecosport’s about 6,000 units.
The City established Honda in India. The Scorpio worked the magic for Mahindra. Ford made a comeback with the Ecosport. Maruti snatched the SUV segment with the Brezza. Toyota still has its war horse, the Innova. All these models have been winners.
The Indica was Tata Motors’ big winner. In 2012, the company was selling 10,000-11,000 units each of the Indica and its sedan version, the Indigo, every month, and it commanded an over 14% share of the domestic passenger vehicle market then with annual sales of over 3,70,000 units. But its big bets thereafter, like the Nano, failed to deliver.
Today, six years on, Tata Motors sells barely half the numbers—it sold about 1.6 lakh units till January this fiscal and just over 1.7 lakh units in FY2017, against over 3.7 lakh units in FY2012. Its market share has also slipped to just about 6%. While the decline in market share can be attributed to the entry of many more players, the absolute decline in sales volumes is telling.
In 2016, Tata Motors initiated a ‘transformation’ journey under the then newly-appointed CEO, Guenter Butschek. The company had then sought to bring about a change in its brand positioning from an automaker that makes cars for commercial operations like taxis to an automaker who makes cars for personal use. While it has managed to cover some ground on the perception front, with the launch of sleek urban models like the Nexon and the Tigor, this hasn’t done too much for sales. Compared to sales of 1,11,500 units in the April-January period last fiscal, this year it has clocked sales of a lesser 1,11,264 units in the same period.
While by the close of the current fiscal, sales may surpass last year’s numbers on the back of demand for the Nexon, which was launched on September 21 last year, it certainly won’t signal a big swing.
That said, passenger vehicle sales of the company are definitely better than in FY2016, when they hit a low of under 1.5 lakh units. The company has also been focusing on expanding its network and improving its after-sales service quality to improve customer experience and loyalty.
Dinesh Bhasin, head, customer support, passenger vehicle business unit, Tata Motors, says the company’s PV sales have seen an uptick since the lows of 2015, not only due to new launches, but also following its renewed focus on customer service. “About two-three years back, it would take one full day to service a car. But today, a car owner need only wait 90 minutes to get a car serviced,” he claims.
This year is likely be another slow one with no new launches, though 2019 will see a new SUV and a premium hatchback being unveiled. The company expects to have a complete range of passenger vehicles by 2023-2024.
As per analysts at JP Morgan, the company’s tunaround strategy for PVs involves “driving variable and fixed-cost reduction and building a robust and efficient supply chain via supplier base rationalisation, and optimisation of manufacturing footprint”. All good things to do certainly. But how will any of this help if the cars don’t sell, one wonders.
Currently the company’s capacity utilisation of PV capacity is barely 35%, and that needs to move up sharply for a turnaround.