Tata Motors arrests declining trend in commercial vehicles
Tata Motors, the country’s largest commercial vehicle (CV) maker, has arrested the declining market share in most segments. It has increased its share in the light commercial vehicle (LCV) business and maintained its share in the medium and heavy commercial vehicles (M&HCVs) segment. This helped its domestic business turn profitable in the OctoberDecember quarter, after five successive quarters of loss.
The company reported standalone profit of ~1.8 bn in that quarter of 2017-18, against losses of ~10.46 bn in the corresponding quarter before. Standalone (domestic business) revenues for the quarter increased 59 per cent to ~161 bn. The Ebitda (earnings before interest, taxes, depreciation, and amortisation) improved 750 basis points to 9 per cent in the quarter. Girish Wagh, president of the CV business unit, said it was a key contributor in the turnaround.
“There were tailwinds in the market and that certainly helped. But we have also undertaken a very aggressive cost reduction programme. That has started giving us dividends. We had estimated a four-digit reduction in costs (at least ~10 bn) during the year and a significant portion of the gains have come,” he told Business Standard.
The company’s M&HCV (truck) sales in domestic market grew 55 per cent to 45,895 units in the previous quarter, according to Society of Indian Automobile Manufacturers data. The LCV segment (for goods) expanded 42 per cent to 51,094 units in the domestic market. The CV business accounts for about threefourth of the company’s domestic revenue.
TataMotors had been losing market share in CVs for last four years. For instance, the share in M&HCVs came down to 51.2 per cent in 2016-17 from over 58 per cent in 2013-14. The share in LCVs (goods) came down from 49 per cent to 39 per cent in the same period. In the LCV (passenger) segment, the share shrunk from 39 per cent to 30 per cent.
This financial year has seen an improvement. In 2016-17, the M&HCV share was 51.2 per cent. The April-December share has been 51.75 per cent. Similarly, the share of LCV (goods) improved from 39.2 per cent to 41 per cent.
“There have been shortages in supply of engines and sheet material as our production is continuously increasing. In the next financial year, this would be completely addressed,” said Wagh. The company has managed to prioritise production and improve execution rigour. New products have come in and we have filled the white spaces, he added.
Wagh said competition had become fierce and the company focused on stronger customer engagement. “We also focused on improving dealer profitability through incentives and retention margins during the second and third quarter.”
Discounts on CVs as a per cent of the list price has dropped in the second and third quarter. “We have been focusingon multiple areasapart from cost reduction so that the margin is protected and enhanced. Our margin actually moved up this year,” saidWagh.
Wagh is looking to increase the company’s market share.