Tata Motors’ Passenger Vehicle Innings: The Second Wind?

The Indian automobile industry faced its worst ever slowdown in terms of sales between 2012 and 2015. Times were gloomy; sales numbers across almost all categories plummeted by the month. Automobile pundits were seen firefighting at every possible occasion, pinning hopes on the future.

While almost every automaker faced the brunt of the downturn, ones with a dated portfolio of offerings were the worst hit. Prominent on that list was Tata Motors Ltd., which hadn’t launched a single new product since the Aria multi-utility vehicle in 2010, and saw interest wane by the day.

Tata Motors was once India’s third-largest passenger vehicle manufacturer, in terms of despatches, and fell to the fifth spot between 2011 and 2013. In the same period, Mahindra & Mahindra Ltd. and Honda Cars India Ltd. launched fresh products that appealed to the Indian buyer. There were a few months where Tata Motors was overtaken by Ford India Pvt. Ltd. and Toyota Kirloskar Motor Pvt. Ltd., and the company found itself at the fifth and sixth spots in terms of passenger vehicle sales.

In the absence of in-house engine technology for passenger vehicles, particularly cars, the automaker made what looked like half-hearted attempts at launches during the 2012-2015 period. The once-popular Indica hatchback, which had got a makeover in 2008 to be re-branded as Indica Vista, received an upgraded variant of FIAT SpA’s 1.3-litre MultiJet diesel motor in 2013. Nano got minor facial changes over the years with trims such as the GenX and Twist, but that largely was the extent of Tata Motors’ ‘new’ products during the phase.

New Launches: A Chequered History

The Nano has been a questionable business project probably since the controversy around Tata Motors’ Singur plant in West Bengal. Despite several attempts to revive the product, sales have been on a continuous decline. In September 2016, the automaker sold only 610 units of the Nano, down almost 75 percent from the 2,415 units despatched in the year-ago period.

Nano carries a sticker price ranging from Rs 2.15 lakh up to Rs 3.12 lakh in New Delhi, compared with ex-showroom prices between Rs 2.67 lakh and Rs 4.17 lakh for Maruti Suzuki India Ltd.’s Alto sub-compact hatchback. Despite a seemingly higher price tag, Alto manages to sell over 25,000 units per month, even as Nano struggles to enthuse buyers. The recent letter to Tata Sons by its expelled Chairman Cyrus Mistry also mentioned how the Nano had “no line of sight to profitability”.

Beyond the Nano, Tata Motors did not show any signs of a vision in terms of product strategy for its passenger vehicle business.

Sales of two new products that did see light of the day during the period – Safari Storme and Aria – never really picked up.

Losing Out To Competition

In comparison, peer Mahindra & Mahindra gave the Indian buyer fresh products such as the popular XUV500 sport utility vehicle (SUV), and smaller SUVs such as the Quanto and TUV300. Honda Cars India, which wasn’t direct competition to Tata Motors in terms of products, was finding its stronghold in the Indian market, and saw its numbers increase by the month. Honda Cars had launches such as the Amaze notchback, Brio hatchback, and updated versions of the City mid-sized sedan. The result of all the aggression shown by rivals, combined with Tata Motors’ silence, was a consistent fall in sales numbers.

Mahindra & Mahindra saw sales rise or fall by small percentages through most of the period, barring 2013, when SUV sales tanked. In September 2013, Mahindra & Mahindra’s despatches fell by 20 percent on year, but Tata Motors’ sales plummeted nearly 41 percent, according to data provided by the Society of Indian Automobile Manufacturers.

Honda Cars, which had made its debut in India much later, was beginning to establish its presence. Domestic sales for the Indian arm of the Japanese auto major were at a modest 4,739 units during September 2011, when both Tata Motors and Mahindra & Mahindra were reporting figures in excess of 20,000 units. By September 2014, Honda Cars had reached sales figures of 15,015 units, when Tata Motors had slipped to a 11,931 units, and Mahindra & Mahindra was still close to 20,000 despatches.

The dismal performance was visible in the manufacturer’s nosediving market share as well. Once with a healthy market share of a little over 10 percent, when the Indica was a favoured choice, Tata Motors’ share fell to 4.7 percent during 2015-16 (April-March), according to its annual report.

The automaker did launch the Zest notchback towards the dusk of 2014 and its hatch sibling, the Bolt, in early 2015, but the products did not get the desired response from buyers. The proof was in the sales numbers. Even now, the aged Indica and Indigo models manage to find more buyers that the much-fresher models, despite similar pricing.

One of the reasons behind Bolt’s failure could be the timing of the launch, as the automobile industry was in a downturn then, said a senior automobile analyst with a domestic brokerage who did not wish to be identified. But largely Tata Motors is not a Maruti or a Hyundai and so it is not that easy for its products to sell, the analyst added.

Distribution and market presence were never major issues for the automaker, thanks to a well-established name in the Indian household.

One of the shortcomings for Tata Motors was the lack of engine technology. The automaker had acquired a technological powerhouse, Jaguar Land Rover, but hadn’t been able to use the British auto major’s technology in its own products, at least not in a big way.

It was forced to tie up with FIAT SpA to source engines, and still does so, but it had a bitter end to its marketing tie-up with the Italian automaker. The automaker was only recently able to develop its first in-house small diesel motor in years. A 1-litre ‘Revotorq’ diesel motor now does duty in its latest kid, Tiago, but the absence of technology for years ensured royalty outgoes to FIAT per model. The manufacturer also has a 1.2-litre ‘Revotron’ petrol motor, which first did duty in the Zest, and even though it isn’t the most agile engine in the segment, it does a fair job of keeping costs down on the back of the smaller displacement, keeping taxes tempered and the fuel economy high.

Remake Of The Great

Perhaps it was the move to rope in football superstar Lionel Messi as brand ambassador that did it. Or maybe it was an overall revival in the market. Or, maybe it really was the company’s latest offering, Tiago.

Patil of LKP Securities agreed.

He did add that factors such as the economic revival and the broader picture in the automobile market also helped Tata Motors’ volumes. The Seventh Pay Commission, he added, was a contributing factor that has brought about a consistent rise in sales.

That logic should have been true for all companies, but Tata Motors has shown higher growth numbers than many of its peers.

Numbers never lie. They didn’t lie when the chips were down for Tata Motors, and they are still truthful when the automaker has carved out a recovery path for itself. Swing to September of this year, and Tata Motors finds itself ahead of Honda Cars again.

During September, Tata Motors sold 16,351 passenger vehicles, representing a year-on-year rise of 21.2 percent, when Honda Cars was at 15,034 units, down almost 19 percent from the 18,509 units despatches in the year-ago period.

While Mahindra & Mahindra still commands the final spot on the podium, Tata Motors looks to be charging at it with its engine roaring. During September, Mahindra & Mahindra sold 20,537 units, up 5 percent on year.

Tiago, to Tata Motors’ credit, isn’t the final card in its hand. The automaker has as many as three launches lined up over the next year or so, with the earliest one, the Hexa utility vehicle, chalked to hit the roads before the close of this year. The automaker also has the Nexon compact SUV and a sedan based on the popular Tiago, codenamed Kite 5, planned for the near future.

Also Read: Tata, What Have You Done With HEXA?

And there are signs that confidence is returning. After steering clear of price hikes for almost a year, in 2016 alone, there were two rounds of increases. The price of the Tiago was hiked twice though its siblings were left alone, such is the confidence the automaker seems to have on its latest product.

Patil is bullish on the near-to-medium-term prospects for the automaker on the back of the planned launches.

Some others though are only cautiously optimistic about the future launches. Buyers still don’t want to be associated with a Tata product if they are spending that much, said another analyst from a domestic brokerage on the condition of anonymity. Introduction of JLR technology could change that perception, the analyst added.

Whatever the trick was, it does seem to be working for the automaker so far, as sales figures have shown a healthy upward trajectory through the ongoing financial year (April-March). The automaker has reported a 9.5-percent rise in its passenger vehicle volumes.

Maybe it really was Messi.