Tata Motors looks to regain 5% CV and PV market share

Tata Motors, which revealed an aggressive turnaround strategy on August 22, a day before its 72nd annual general meeting in Mumbai, is looking to regain five percent market share across both its commercial vehicle and passenger vehicle businesses.    

Chairman Natarajan Chandrasekaran, addressing his first AGM of the conglomerate since he took over, faced a slew of questions from shareholders on Tata Motors’ subdued performance over the past couple of years. “Looking ahead, we expect the business environment to remain dynamic and unpredictable. Our clear focus is the turnaround of the domestic business,” he said.

In 2016-17, Tata Motors’ standalone gross revenues at Rs 49,100 crore were up 3.6 percent year on year. The loss after tax, on a standalone basis, was Rs 2,480 crore compared to Rs 62 crore in the previous year. Elaborating on the reasons for the dismal performance of the company’s domestic business, Chandrasekaran said the CV business faced challenging and uncertain environment due change over to the GST regime, demonetisation and the  “unexpected Supreme Court ruling on BS3 to BS4 migration.”

“On the other hand, the company’s performance also suffered due to sub-optimal execution and market misses. We have continued to lose market share in the commercial vehicle business, reaching 44.4 percent in March this year from a high of nearly 60 percent, five years back,” he said.

Tata Motors’ CV volumes have remained more or less constant at around 320,000 vehicles, over the past three years, while the operating costs have gone up over time, Chandrasekran added. “This has impacted the performance of the company this year,” he said.

Commenting on plans to reverse the situation, Chandrasekaran said, “In CVs, we are focused on ensuring that all product launches happen within our laid-down timelines without any delay, changing the trajectory of our market share curve and start gaining market share, and serious cost improvement plan.”

The management team is working on these on a priority basis, he said, adding that the team led by managing director Guenter Butschek is working together to deliver a strong execution led operating performance. On the passenger vehicles segment, he said the company has improved domestic market share but costs have been going up due to investment in current and future portfolio.

“We are excited by the prospects of the Nexon, which we will launch in September this year,” Chandrasekaran said. Overall, he said, Tata Motors is “working with renewed focus to make our processes efficient and agile to be able to respond quickly to the market”.

“We are streamlining our end to end visibility of the supply chain. We are also focusing on accelerating the timeline of delivery of new products to the market. We are getting ready to leverage the expected market recovery,” he added.

Answering a shareholder’s query about Jaguar Land Rover’s 150 million pounds sterling dividend being less than what the shareholders expected, Chandrasekaran said, “JLR is aggressively pushing volumes and had crossed sales of 600,000 vehicles last year. If JLR has to continue its performance and compete while growing double digits, that requires innovation, product launches and capital. They have delivered excellent profit and operating cash flow, they have to reinvest in the company and if they don’t do that, it will be tough to compete in the marketplace with competition.”

He added, “So you have to appreciate that, this is the journey they have to continue in order to gain momentum, so the dividend has been fixed at 150 million, we can argue that it needs to be 175 or 200 million, I want to correct the perception that people think JLR is not giving back, that is not correct.”

Tata Motors has earmarked Rs 2,500 crore for its R&D spend and will focus on improving its efficiency.