Weighed down by the underperforming commercial vehicles business unit Tata Motors’ Chairman N Chandrasekaran has called for a ‘business turnaround’ in the domestic market. Product delays coupled with hyper-competitive business environment dented the company’s financial performance last year.
The Mumbai-based company, also the country’s largest automobile player, last year recorded its second worst-ever standalone loss in its 72-year history, at Rs 2,480 crore. Its biggest loss came in 2014-15 at Rs 4,738 crore.
“Delays in product launches as well as lack of adequate responsiveness to the competitive environment and an unsustainable cost structure have contributed to this performance,” said Chandrasekaran addressing shareholders in the 72nd annual report of Tata Motors.
In the domestic market, the market share in both the commercial vehicles (CV) and passenger vehicles (PV) have declined significantly. The market share in CV segment has fallen to 44.4 percent from a high of 59.4 percent in FY 2011-12, while market share for PV declined to 5.2 percent from 13.1 percent in the same period.
“In the domestic business segment, business turnaround is the need of the hour and management is working with renewed focus and energy to improve our market share, reduce our cost base, streamline the supply chain and ensure launch of products on time to delight our customers,” added Chandrasekaran.
Rivals in CV segment like Ashok Leyland, Daimler, Eicher-Volvo, and Mahindra & Mahindra (M&M) and in PV segment like M&M, Maruti Suzuki, Hyundai, Renault, Honda and Toyota have chipped away market share of Tata Motors over the years.
Despite new cars launches like Zest, Bolt, new Nano and Safari Storme Tata Motors has not been able to improve its market share. Similarly lack of adequate presence in the truck segment such as the pick-up segment has led to market share erosion.
Little over a year ago the company kick-started a transformational journey under the plan called Organisational Effectiveness (OE). Under this the company undertook various changes including trimming of workforce, streamlining of operations, cutting down the hierarchy levels.
The OE exercise brought a ‘much needed empowerment’ and ‘accountability’ to the organization, as per Guenter Butschek, Managing Director of the company. Due to its magnitude and complexity, the transition of the new management structure with effect from April 01, 2017 faced some challenges, which in is getting addressed on a case to case basis.
“Due to the unexpected and unprecedented changes in the market, we faced a rather hostile business cycle with headwinds in the form of demonetization, the famous Supreme Court ruling on BS4 transition. As a matter of fact, it was not only the market volatility which affected our performance, but mainly our sluggishness in reading the market in time, as we were effectively late to respond,” added Butschek.
Tata Motors has a well-defined and freezed product plan for both CV and PV till 2020. A number of launches are in the pipeline including new SUVs, compact hatchbacks, performance cars, electric and hybrid cars, trucks and buses, semi-autonomous vehicles, smart vehicles, vehicles running on alternate fuels like LNG, ethanol to name some.
“There is an immediate need for action in order to refocus the organization on regaining market share in commercial vehicles and bringing accelerated efforts in cost reduction in order to drive business profitability. I would like to take this opportunity to commit to a stretched plan in FY17/18, thereby compensating on our poor performance in FY16/17 with a promise of a better year. Our immediate priority now is on execution – to address the top concerns of supply constraints, to advance the launch time of some of our new products. In full alignment with the board, we have finalized a business turnaround plan through which we take upon ourselves to deliver a robust bottom-line improvement in FY17/18,” added Butschek.