Tata Trying to Stop Tailspin With Product Tweaks

MUMBAI – Tata Managing Director Karl Slym in June launched a new, customer-focused strategy for India’s second-largest auto maker. But Tata has much ground to regain.

Tata’s domestic light-vehicle sales declined 25.2% through July to 298,654 units, according to WardsAuto data. Market share was 16.4%, down from 20.2% prior-year.

The auto maker reports a fiscal-2013 profit of just Rs3 billion ($49 million), a fraction of the Rs22.4 billion ($367 million) profit recorded in fiscal 2010. Earnings per share were Rs0.95 ($0.01) in fiscal 2013, compared with Rs39 ($0.51) three years earlier.

Results from the April-June quarter are even more dismal, with losses of Rs8.3 billion ($136 million). Credit-rating agencies are threatening to downgrade Tata in view of its losses and slumping sales and market share.

It remains to be seen whether Tata’s consistently profitable Jaguar Land Rover subsidiary will generate enough revenue to offset the parent company’s losses and allow it to pay dividends.

Tata’s problems may best be illustrated by the Nano microcar, which debuted in 2009 and helped fuel a 30% sales increase the following year.

Companywide volume rose roughly 12% over each of the following two years, but, according to the Society of Indian Automobile Manufacturers, deliveries in the fiscal year ending in March retreated 21.1% year-on-year to 54,014 units. From April through July, sales plunged 353.5% from like-2012 to 6,092.

Priced at Rs100,000 ($1,639) Tata expected the Nano would set the market on fire when it launched five years ago. But consumers perceived it differently. Critics say despite its innovations, the Nano was seen as a cheap product even by 2-wheeler owners, who deemed it below their dignity.

The Nano plant at Sanand in Gujarat state is running at less than one-quarter of its yearly capacity of 250,000 units. Some 30 suppliers that invested Rs3.4 billion ($55 million) in factories and machinery after relocating to Gujarat from West Bengal still are hoping the tiny car will stage a comeback.

“As vendors, we are expecting Nano sales to improve,” Surinder Kapur, chairman and managing director of Sona Koyo Steering, tells the Business Standard newspaper. But, he adds, “We are trying to rope in more players such as Mahindra for supplying auto parts. We would like to see our Sanand unit as a supplier to auto parts to the entire western region,” 

Tata is not ready to introduce any new models that could attract buyers, so it has simultaneously unveiled eight models facelifted with a few new features across several brands.

The Indica Vista hatchback has a revamped suspension that works quietly and ensures good handling and drivability on India’s bad roads. The Indigo eCS’s new CR4 diesel engine achieves fuel efficiency of 58.3 mpg (4.0 L/100km), and the compact sedan’s Feather-Shift transmission enhances performance in city driving.

The CR4 powertrain also is featured in the new Sumo Gold multipurpose vehicle. It claims improved fuel economy of 35.9 mpg (6.5 L/100km) and a segment-leading 197-in. (500-cm) turning radius.

The Nano is being repositioned as a smart city car with new features such as power steering and diesel and compressed-natural-gas engine options. A Nano diesel with a 0.8L engine (compared with 0.62 for the gasoline version) reportedly achieving 58.8 mpg (25 L/100 km) has been spotted undergoing preproduction road tests.

Tata also is launching an all-new upgraded range of other CNG-powered vehicles.

“These are challenging times for Tata Motors,” Chairman Cyrus Mistry says in a speech at the annual shareholders meeting. “But they are full of new opportunities.”