Tata Motors banks on new car platform
In its latest ‘transformational’ journey, the carmaker is focusing on a fresh product line-up and smarter dealership network
Tata Motors’ share in the domestic passenger vehicles (PV) market has been declining significantly over the last five years. The carmaker’s share has declined to 5.2 per cent in 2017 from 13.1 per cent in 2011-12. Tata Motors’ top leadership attributes this weak performance to delays in new product launches as well as the organisation’s lack of adequate responsiveness to the competitive environment and an unsustainable cost structure. Embarking on a yet another “transformational” journey to get itself back in the game, Tata Motors’ focus this time around is on developing a fresh product line-up by developing new vehicle platforms. Alongside, it is also focusing on repositioning and modernising its dealership network across the country.
To refresh its product line-up, the carmaker has embraced a new vehicle platform strategy. Tata Motors is working towards reducing the number of vehicle platforms from six to two by 2020. Going forward, each of the two newly developed vehicle platforms will offer the carmaker an opportunity to come up with seven to eight different products.
“A flexible and cost-effective vehicle platform strategy is required to fill in the gaps in our product line-up that has come about with the emergence of new segments in the car market,” says Mayank Pareek, president (passenger vehicle business unit), Tata Motors.
For example, at present SUV (compact sports utility vehicle) is the fastest growing segment. This is a category which did not exist a few years ago.
In such a scenario, the key question before the leadership was to decide whether it makes business sense to create a new platform for every emerging opportunity or rather develop more flexible platforms to create opportunities for the company by supporting a diverse product portfolio.
According to Pareek, the two-vehicle platform strategy will provide Tata Motors the much needed design flexibility to create more opportunities for itself in existing as well as emerging car segments.
With each platform, the carmaker will have the capability of building seven to eight vehicles. Such an approach will help it come up to scale, and reduce complexity in the manufacturing processes.
Currently, the company is busy modifying its manufacturing facilities to align with its dual vehicle platform strategy. Its manufacturing plants are getting updated as they are being equipped with new fixtures and tools.
At the same time, the carmaker is relooking at its supply chain. A flexible manufacturing line calls for a flexible and far more responsive supply chain. The company is closely working with its existing vendors to ensure they align with its objective of developing flexible vehicle platforms — right from design and development to manufacturing stage. Tata Motors is also leveraging this opportunity to consolidate its large supplier base. The company is hoping that a small but quality-conscious pool of vendors will help it reduce time consumed in managing a diverse set of vendors and at the same time increase meaningful engagement with a handful of suppliers. Also, working with fewer vendors will provide benefits of economies of scale to the suppliers.
Talking about effecting changes in its distribution and marketing strategy, Pareek acknowledges that as an organisation Tata Motors has been slow in gauging the changing preferences of car buyers in India.
“Today’s consumer wants to experience the best product, and as a carmaker one cannot afford to not offer them something that isn’t contemporary and global. And at the same time, you cannot be seen to be priced out,” says Pareek.
Tata Motors is hoping that its future vehicle platforms will help it accomplish 3Cs — that is communicate, connect and comply with the choice and demands of a young consumer group, preferably millennials.
One cannot tap into young buyers, a majority of who are below 35 years of age, by merely getting on board a brand ambassador. Neither reaching out to them on Facebook or other social media will convert them into a buyer because their media consumption habits need not entirely influence and trigger their purchase decision.
And hence to attract young buyers, Pareek recommends that a company like Tata Motors needs to overhaul the consumer experience that it provides to buyers. The showroom experience should reflect the ethos of modern demographics. Towards this end, Tata Motors is digitalising its showrooms and converting them into experience zones.
“The dealership focus has to shift from ‘high pressure’ selling to offering consumers a ‘differentiated and immersive’ product experience to help her evaluate the vehicle on offer. Whether a deal is closed or not closed should not be the priority,” says Pareek.