Tata Motors: How to win buyers and influence sales
In a slowing market, the company has announced discounts in order to woo buyers into its showrooms . Will such a move help in the long run? A report by Brian de Souza.
More buyers like Shailendra would be music to the ears of Tata Motors, whose February 2013 sales have plunged by 60 percent over the year-earlier month. The company sold just over 10,000 units in the month with the Indica and Vista accounting for close to 4,000 units. The Nano, which sold 7,703 units in January 2012, sold just over 1,505 units a year later.
Last week, the company announced its best discounts so far with the price of the Indica reduced by Rs 30,000 and the Manza Club Class by Rs 50,000. The company also launched what it calls an ‘industry first’, the ‘Club Class Buyback Assurance’. Under this scheme, the carmaker will offer its customers 60 percent of the purchase price after three years. Clearly, the strategy to cut prices is designed to bring in more footfalls and add to the numbers as the end of the financial year draws near.
OEMs work hard to draw buyers
Carmakers have used a variety of ways to woo buyers to showrooms in recent months. In December 2012, Ford India had a day-long event across the country in which discounts were offered on the entire range. Basically, the aim was to push sales of the Figo whose numbers have fallen from around 6,500 units in the first year to about 4,500 units last year. Then last month, Volkswagen India launched a three-day scheme starting February 14 , in which a buyer simply had to pay 50 percent of the price of the saloon, and pay the balance in a year’s time. The scheme, like the Ford one, has had mixed success.
It is in this context that Tata’s offer to cut prices has to be seen. It is the first direct price cut from the company in the year. Sales for the passenger car sector in the current financial year are expected to be flat as per the projections made by SIAM at its meeting to announce its third quarter results in early January 2013. The slowdown has affected all sectors including the entry-level hatch and saloon segments as buyers smitten by higher interest rates have stayed away.
For now, Tata Motors can only boast of the Indica as its mainstay with the car accounting for 30 percent of sales in February. For the 11-month month period ended February, the Indica brand sold 72,638 units as against 94,286 units, a fall of 22 percent over the year-earlier 11 months. Sales are typically higher in the last month of the year as buyers queue up for benefits of depreciation. At a press conference to announce results, managing director Karl Slym said the company had been cutting its stock in the field and is operating in a build-and-sell environment. The company has also embarked on a variety of initiatives in the purchasing department aimed at rationalising activities and cost benefits.
The company has also kicked off a key initiative which aims at enhancing the customer experience at the showroom level. As part of this, two showrooms, one each in Delhi and Mumbai, have been totally re-done and will be the company’s flagship retail outlets, a window to the potential customer. It is, however, clear that the Tata passenger brand is under pressure. With its only potential volume warrior, the Nano, not making the kind of impact it was expected to (the Nano sold just 8 percent more in calendar year 2012 as against 2011), it is the Indica that has the potential to bring in numbers. One of the clear challenges is that the market in which the Indica faces competition from the likes of the WagonR that recently received a refresh and despite its boxy design, has an appeal at the entry-level..
Given the slowdown and the grim prognosis, it is very possible that Tata Motors’ customer base could well shrink. However, a scenario like this could well help Tata Motors position its products into the right segments. India’s compact segment has a slew of players operating at various price points even as new players like Nissan (with its Datsun brand) may target.
The fact is that all players are operating in a scenario in which margins are under pressure. The challenge for any carmaker is to make money per car as well as ensure that the distribution network is profitable. It will continue to be a challenging times for the carmaker.
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