‘Tata Motors is definitely looking for more Make-in-India projects under the defence business.’
Ravi Pisharody, executive director, Commercial Vehicles Business Unit, Tata Motors, on current growth trends, the high potential of the defence sector business, and increasing exports of the Prima and Ultra range.
Ravi Pisharody, executive director, Commercial Vehicles Business Unit, Tata Motors, on the way the CV market in India will perform, the high potential of defence sector business, and increasing exports of the Prima and Ultra range of trucks. Excerpts from an interview with Amit Panday.
With M&HCV sales in India gradually improving, do you see them as a clear indication of economic progress and also the right direction?
This is a difficult question to answer. There are two aspects to this. M&HCVs have always heralded a decline or have shown drastic improvements. In 2012, the M&HCV segment was the first category to fall and it took eight months for the country to realise that we were witnessing a recession.
Now, for the past four quarters, it has been growing (M&HCV sales rose by 16% in FY2014-15 and 23% in Q1 FY2015-16). But the basic reason behind this is fleet replacement. The actual manufacturing and mining sectors that are required to push up the production index in India are still growing very slowly. There is some recovery but we would like to see more of it to really answer your question very strongly. If you would have asked me this question six to eight months ago, I would have been more bullish. However, the good thing is that the growth is continuing.
Do you think the government at the Centre has been working proactively to push infrastructure projects across the country, which would eventually translate into a flow of orders for CV makers like Tata Motors?
On one side there has been a good spurt like government ordering in the areas of paramilitary and defence orders. There was quite a bit of slowdown but now they have started looking up. Tata Motors has recently bagged an Indian Army order worth close to Rs 900 crore (for 1,239 units of Tata’s indigenously developed 6x6 high-mobility multi-axle vehicles). Many more orders are in the pipeline in not just defence but across paramilitary, BSF, CRPF and others. All of them are our customers.
On the economic side, the fact is that the recession was pretty deep. I believe the government is making efforts to make things fall in place and that some infrastructural spend is getting visible. So the next big wave of growth has to come from public spending, which means from government spending. Most companies in the private sector have already invested in creating capacities. The government’s Budget is providing for a massive spend on infrastructure, telecom and power. We are beginning to see some signs of government spending but during the monsoon, these things slow down. I hope after the monsoons things will start flowing.
Make-in-India is a hugely discussed government initiative. While it is focusses on encouraging companies to manufacture more in India and increase localisation operations here, how does it shape up for a home-grown company like Tata Motors?
This entirely depends on the sector. As far as cars and CVs are concerned, we are already making them in India and have the capacity in place for the next five years. But when more and more industries invest in India, obviously it will have an impact on the economy and jobs.
One sector where Make-in-India has huge potential (for us) is defence. The order I spoke about earlier marks the first time that such an order has been awarded to an Indian company to make a 6x6 or an 8x8 truck. This has happened after 25-30 years – all this while, these trucks were being imported. Within the defence industry, there was a view that Indian companies cannot make the trucks of these specifications as required. So I think the Make-in-India initiative, especially in the context of defence, has worked well and this is a large market.
Since Tata Motors is one of the leading suppliers to the defence sector, does this (Make-in-India) happen to be an advantageous campaign?
Yes, correct. We are very well placed as we have invested in a number of products and platforms (for defence applications). Any (defence) product needs a lot of trials with the army before it gets approved. We had quoted for this order of 1,239 units (order size for indigenously developed 6x6 high-mobility multi-axle vehicles), back in 2011 after which they conducted trials. So we are definitely looking for more Make-in-India projects under defence business.
On the export side, how are the Prima and the Ultra range doing?
They are doing well. First of all, let me talk about exports which is a big area for us. If you see the Q1 (April-June 2015) numbers, we have grown by over 35 [the company exported 12,863 CVs, growing by 38.52% YoY in Q1].
Exports are crucial if you want to grow from about 40,000 in 2014-15 to about 150,000 units in 3-4 years’ time. (Tata Motors recorded total CV exports of 46,160 units, registering a growth of 7.57% in FY2014-15.) This means that we need a CAGR of slightly more than 30 percent.
Within this, we are growing in our conventional products also but in the more medium developed markets like Thailand, South Africa and even Middle East. The Ultra and the Prima trucks will fuel growth in these markets. We started last year and we did a lot of trials over two years. We are now getting repeat orders. So the same customer, who earlier preferred a Tata tipper in Qatar where (2022 FIFA) World Cup preparations are going on, is coming back for more. This customer had earlier invested in European trucks. As you can see, we are starting to get repeat orders from these markets.
I think the Prima and Ultra – in 2015-16, 2016-17 and beyond – will play a major role in not just improving the export numbers but also giving us a different brand image globally. This would help us earn an image that we are as good as the best in terms of products, aftersales services and other areas.
This business (CVs) is all about the cost of operations. After the Nano and Jaguar stories, Tata Motors is not an unknown name. In some markets like Africa, we have been there. But in new markets like ASEAN, where we have launched our products in six new countries in the past two years – Tata Motors is seen as a globally valuable company.
Over and above that, if we can prove our cost-of-operations proposition, then I think we have a good starting point.
The LCV market has been seeing declining numbers for some time now. What are the reasons for that? (Tata Motors sold 29,012 LCVs in Q1 FY2016 as compared to 34,750 in Q1 FY2015 in the goods carrier category.)
In terms of the real economic transportation, the load has still not increased. When the economy drops, an Ace Magic customer, who pays his instalments from his monthly income, goes through difficult times. When his monthly income starts dropping, he begins defaulting. However, that’s not the point. Because of the huge NPAs (non-performing assets) on LCVs, the loan rates have dropped.
Earlier in 2011-12, if the customer was getting up to 95% funding, today he is getting 80%. Then you also have registration and insurance costs. Today, his vehicle running is less and therefore his returns on his investments are not good enough. I think we need to see that turnaround, which can only happen when the economy improves and the financers are also willing to take more risk.
Sunil Bohra, the CFO of Uno Minda Group speaks to Autocar Professional about how the premiumisation trend in various veh...
Manoj Kolhatkar, the Managing Director of Gabriel India, a suspension component specialist talks about the company’s glo...
Exclusive: Skoda CEO Klaus Zellmer says next phase of investment in India approved, targets 5% share by 2030
In an exclusive interview, Skoda Auto CEO Klauss Zellmer details the brand’s future growth strategy in the fast-growing ...