The CV segment brings 80% of the FY17 Rs 49,100 cr standalone revenues
Tata Motors, the country’s biggest automobile company by revenue, sustained cumulative losses worth Rs 7,200 crore (Rs 72 billion) during the past three financial years in the domestic business, which mostly fell under the tenure of former chairman Cyrus Mistry.
No wonder his successor N Chandrasekaran has sharpened focus on turning around the company.
Within the company, Chandra’s priority is domestic business, as the luxury brand JLR is “doing well”.
“We want to gain in commercial vehicles (CVs)... We want higher growth, higher market share and higher profitability. We are driving them very hard, as we have lost all three.
We have lost market share very significantly, we have suffered on growth and we have increased the cost structures.
We are looking at all three - it’s a big priority and a massive programme is underway to look at each of these aspects,” Chandra said in a newspaper interview.
The company has a 36.51 per cent share in the domestic medium and heavy bus segment, while its share in the medium and heavy trucks is 51 per cent (during H1, FY18).
The share in light CV (passenger carriers) and goods carrier is 31 per cent and 40 per cent, respectively.
Data from the Society of Indian Automobile Manufacturers (Siam) shows the company lost share in each of these four segments since FY14.
For example, the share in medium and heavy trucks was over 58 per cent in FY14.
Similarly, the share in light CVs was 49 per cent. From a leader in each of these segments, the company now leads only in medium and heavy trucks.
Rivals like Ashok Leyland and Mahindra & Mahindra have taken away share and emerged leaders in certain segments.
The CV focus is understandable since it brings about 80 per cent of the Rs 49,100 crore standalone revenues (FY17) and would play a critical role in bringing the standalone business back to black.
“If I look at the domestic business what is it that is hurting us — the drop in profitability in CV and the increase in loss in passenger cars,” Chandra said.
He listed debt reduction, rigorous capital allocation, growth revival, market shares and margins of CVs as priorities for the company’s domestic business.
The company is targeting a five per cent gain in the CV market share through a host of launches and improvement in retail, especially, in micro cities.
It is also eyeing an improvement of more than Rs 1,500 crore (Rs 15 billion) in the bottom line at a standalone level.
Guenter Butschek, chief executive officer and managing director at Tata Motors, referred to CV as the “backbone” of the company in August and announced investment of Rs 1,500 crore to expand the business.
“In CV, we are in process to upgrade the old fleet with new powertrain solutions. We have three main focus areas in CV. We need to improve our cost position. We have built up cost over the years and it needs to be right sized. This reduction will be across Tata Motors.
Secondly, we will focus on volume and gain market share. From a revenue and profitability point of view its commercial vehicles (medium heavy duty trucks)…it is the focus point. This is the backbone that keeps Tata Motors going,” Butschek told Business Standard last month.
But the passenger vehicle business, though one-fifth of revenue, is also getting attention.
“Our cost structures are out of whack. Every single car and model is losing money. It's important to pick up volumes and try to become profitable,” said Chandra. Recent product launches, while they are doing well in volume, are unlikely to make money for the company.
Products such as the Tiago and Tigor and the recent compact sport utility vehicle Nexon have all been launched at highly aggressive prices. In the passenger vehicle business, the investment of Rs 2,500 crore (Rs 25 billion) would be done on the advance modular platform this year to develop two products.
Photograph: Punit Paranjpe/Reuters
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