Homegrown auto major Tata Motors plans to pump in Rs 4,000 crore in the current fiscal to bring new passenger and commercial vehicles to the market as part of its turnaround strategy. The company also expects to save over Rs 1,500 crore and add to the bottom line in its domestic business through various cost optimisation exercises and hopes return to the black in 2017-18. Besides, it is looking at “temporary hibernation” of some of its production lines across different plants in order to optimise manufacturing. In line with its new approach, the company also unveiled its new brand promise with tagline ‘Connecting Aspirations’.
Tata Motors Managing Director Guenter Butschek said the company has embarked on a turnaround programme with the next 6-9 months being critical as against an earlier planned business transition, to be achieved on the next 2-3 years. The domestic commercial vehicles business is the backbone of Tata Motors and the focus of the turnaround is on getting higher market share of 5 per cent in this segment and launching new products faster in the market, Butschek said. “For the CV segment we have earmarked Rs 1,500 crore for FY18,” Butschek said, adding that 10 new products have been lined up. Out of these six will be in medium and heavy CV segments, while four products are in intermediate CV category, he said.
When asked about passenger vehicles, he said the investment would be of Rs 2,500 crore but did not share product launch details. Tata Motors will launch compact SUV Nexon next month. By 2019 it plans to launch the first product from its AMP platform which can have four body types, he said. Commenting on the company’s ongoing turnaround programme, Butschek said the company has suffered last fiscal due to a combination — of market volatility and its inability to respond quickly to the changing environment.
Butschek said Tata Motors has undertaken a lot of initiatives to improve operation, which could potentially help it save Rs 1,500 cr and add to the bottomline. With focus on turning around the domestic business, he said the company’s management is reviewing business every month with new chairman N Chandrasekaran, while a similar exercise is done with board every six weeks. On a standalone basis, Tata Motors posted loss of Rs 467.05 crore for the June quarter of 2017-18 fiscal. It had registered a profit of Rs 25.75 crore in the same period of 2016-17.
As part of the overall plan, he said Tata Motors is looking at manufacturing footprint optimisation. In some of the plants, he said in the commercial vehicles segment there was only about 40 per cent capacity utilisation while in passenger vehicles segment it was as low as 10 per cent in Sanand at one point of time. “We need to take a look at how best to utilise our plants,” he said adding a strategy is being worked out so that going forward “some lines may go in for temporary hibernation” and become functional when the demand is back.
He said the details were still being worked out as to which lines in what plants could possibly go for such measures. Tata Motors has plants in places including Pune, Jamshedpur, Lucknow and Pantnagar. When asked by when Tata Motors expects the domestic operations to be back in the black, he said “hopefully this fiscal”. Butschek also said the company’s plans to come up with sports car RACEMO has been temporarily put on hold with the focus on commercial vehicles to lead the overall turnaround taking priority. “As part of internal agenda for crafting the turnaround we also very carefully looked around in our capital expenditures, we had to re-prioritise some of the projects in the initial list,” he said.
In a significant move to move up the technology ladder, the acompany is betting big on automated manual transmission (AMT) to boost sales of its passenger vehicles (PVs), expecting 50 per cent of the product portfolio to have the technology in future. The company has introduced the AMT technology on mid-end variant of its popular hatchback Tiago priced at Rs 4.79 lakh to add to the existing top-end variant of the model.
Besides, Tata Motors plans to launch AMT-equipped version of compact sedan Tigor in the next three to four months, while upcoming compact SUV Nexon will have it before the end of the ongoing fiscal. “When we launched AMT variant of Tiago on top-end variant earlier this year, there was a substantial jump in sales of the model. Over 15 per cent of total Tiago booked today are AMT variant,” Tata Motors Head Marketing Passenger Vehicle Business Unit Vivek Srivatsa said. He said the company is working towards making AMT even more affordable to its customers by introducing it at the mid-end variant of Tiago.
“We expect around 10 per cent increase in overall sales of Tiago after the introduction of AMT in the mid-end variant,” he said. Tiago is currently clocking wholesales of around 5,000 units a month on an average with a waiting period of 15-40 days depending on variants, he added. When asked if Tata Motors planned to introduce AMT in other models, Srivatsa said: “It will come in Tigor in another three to four months.” Tigor is selling around 2,500 units a month and is expected to go up over 3,000 by around Diwali, he added. While the company is expected to launch compact SUV Nexon next month, he said the model would have AMT in both petrol and diesel engine options by the end of the ongoing fiscal.
Bullish on the AMT technology, Srivatsa said considering the evolving customer aspirations, Tata Motors expects 50 per cent of its product portfolio to have it in future. “AMT is going to be a key part of our growth strategy,” he said. It has found good acceptance in India mainly due to ease of driving especially in traffic conditions, fuel efficiency and is not so expensive unlike the proper automatic transmission technology, he added. When asked about sales outlook, Srivatsa said: “The industry grew 7.3 per cent in April-July this fiscal whereas Tata Motors was able to clock 10.5 per cent. With the AMT variants coming up and new model lined up, we should be able to grow in double digits this fiscal.”