Refreshed passenger portfolio unlikely to help Tata Motors

To arrest the decline in passenger vehicle sales in the domestic market, Tata Motors unveiled eight improved versions of its existing models on Wednesday.

From better gear shifts to improved multi-media options, the company is promising a much better driving experience to consumers through the re-launch.

Given the drag that the domestic business has become for the company, the company’s action is a sign of desperation.

Analysts say 'too little and too late' refreshments in the current circumstances might not revive growth in volumes.

The company has seen sales of its passenger vehicles decline steadily over two years. Given the increase in competition from global automakers, the market is not attaching too much importance to the move.

Surjit Arora of Prabhudas Lilladher says: “At best the refurbished portfolio may help the company arrest the sharp decline in sales but volume growth is some way off.”

No doubt, the automobile sector is seeing a secular slowdown in demand but Tata Motors has been the worst hit as it has not launched

new product in the passenger vehicle space for a long time.

From the peak levels two years ago, when Tata Motors was selling 22,000 passenger vehicles a month (including sports utility vehicles or SUVs), the monthly rate is down to around 9,000 units.

For the last two years, domestic sales have been declining in double digits.

In May, Tata Motors' passenger car sales volume fell 48.6 per cent compared to the corresponding period last year, to 8,927 units.

Overall, SUVs are growing at a very rapid clip for the rest of the industry, but for Tata Motors, this segment declined 30 per cent on a year-on-year basis to 2,207 units.

Sluggish sales of the Nano are a big drag on it profitability.

The ambitious car project, into which the company has sunk Rs 2,000 crore (Rs 20 billion), has not helped the company garner volumes as expected.

Given the scale of investments, analysts believe Nano sales should not be less than 12,000 units a month.

However, after the initial problems with the car, sales have dropped to below 1,000 units a month.

For the next 18 months, analysts do not expect any new launch either, which could have helped the company stave off declining sales.