Soon after launching the Tiago hatchback in Mumbai today, Guenter Butschek, Tata Motors’ MD and CEO, spoke about the small car's big role in transforming the company and the role of collaboration as a route for growth.
What is the Tiago's role in the larger scheme of things?
The package that we have put together is very, very comprehensive and for good reasons to be called a game-changer. The hatchback segment is the most competitive one – it’s not only the largest but also the most crowded. It wouldn't have been good enough to just bring in another hatch into the market. That's the reason why we deliberately decided to go with the Tiago first and then with the other products because this is the most impactful market segment.
If we can actually gain market share, it translates into volume where there's a very strong message in the market. We might climb up the ladder in terms of individual procurement priorities of our private customers where we are currently not necessarily on the top of the list. At the same time, we are going to pave the way for the products to come where we are addressing different market segments.
The Tiago plays an important role in the market and it's equally important internally. It is the first product that has been effectively engineered and brought into manufacturing on a whole new set of processes in engineering, manufacturing, quality and supply chain management where we used it as to prove that we can actually do the business differently. The nice thing in our industry is that you get something in return immediately – it is called volume and market share!
This is a product that cannot be easily put in any of the different boxes. From a pricing point of view, we are medium, from a length point of view we are in a sweet spot between medium and high, and from a feature point of view we are rather high. So, therefore, we have a good opportunity to challenge the market segment; we can even redefine the market segmentation to make the Tiago a real game- changer.
A car project of this size, features and new engines may be too difficult to be profitable at this price level. Is there a conscious compromise on price, for a short period, to gain customer confidence?
We have full control on the cost. I am not going to answer this question because we have never ever answered a question regarding the profitability of an individual product.
The pricing decision and, even more important, so that we have good control over costs is that we have very strong cost optimisation initiatives which we are going to further foster in the organisation to further improve our cost point and, therefore, our cost competitiveness.
So, as an overall game-plan in place, the Tiago plays an important role in this context, and it's very well accommodated by the overall functions.
You have just taken charge and this is your first product at Tata Motors. Can you talk about some of the new initiatives that the company has taken as a run up to the product launch, which is a departure from the past? Does it also make you relate to any of your previous launches in your previous role?
From my previous experience, it is difficult to draw reference because with 30 years working for Mercedes-Benz, I was in a completely different market. Therefore, it would not be fair to put the Tiago in context of any of my previous launches.
However, I can perfectly put the Tiago in the context of my previous experience because it is not my first time that I am facing the need for major transformation with an element of turnaround where the question is how do I actually take an organisation on the transformational journey. I must admit, in the past I usually took the organisation on a journey on the basis of a need for action which was characterised by the overall state of the company, so to say, in financial terms, in terms of performance.
The Tiago plays a crucial role. It is only 3.73 metres long but it is going to be a very powerful transformational icon because it comes with a new design language and features. It's the first product built on a new set of processes where we as an organisation have gone through tremendous learning.
You need to take people through the journey of the new processes in order to gain the experience. You need to learn your lessons. You need to correct. You need to plan to act and connect, then we actually move forward. So, there's still plenty of room for further improvement. This different kind of working makes a huge difference and delivers different results, better results. This is the important point.
The other reason is that if the Tiago works, it is an encouraging message to the organisation. It is a major transformational change in the market perception, getting us on the preference list of our private customers.
Many significant OEMs in the global industry are looking at collaborations to sustain and grow. Would Tata Motors also look at collaboration/s as a growth route?
We will deliberate all opportunities to support long-term profitable growth.
Groupe PSA is looking at the partnership route to enter India. Has the company approached Tata Motors?