India gloomier than China; Tata Motors will be reborn: Slym

"The current economic environment in India is as bad if not worse than it was in 2008. The additional import duties will stress sales of JLR in India which is more worrying than China," says Tata Motors MD Karl Slym.

Speaking exclusively to CNBC-TV18, the veteran auto-industry executive says it is difficult to forecast the impact of new Chinese emission norms on JLR and estimates the emission norms to slowdown to cause hiccup in sales.

"The commercial-vehicle business will take at least 12 months to see a turnaround and steps have been taken to reduce inventory. I expect a mixed year ahead for Tata Motors and the company will be reborn," he says.

Slym says that the inability to launch a brand new product in 2 years was a serious shortcoming and hopes to launch Tata Motors’ first new product in 12 months. "We are not looking at a bond issue yet and are adequately funded for now. There are plans to ramp up manufacturing and operations in India."

The company hopes to manufacture everything locally and will be sold under the JLR brand across India.

Sales of medium and heavy commercial vehicle will continue to be stagnant if  the government does not resolve the hurdles in the infrastructure sector, Slym says. On the government’s plans to clear new a 4-wheeler category of the quadricycle, he adds,"I do not support the quadricycle in its current avatar. Indian quadricycles must have India-specific norms, not those of Europe."

Below is the edited transcript of the interview on CNBC-TV18

Q: What are the potential challenges for Tata Motors and Jaguar Land Rover (JLR) in India taking into consideration the levy of the new import duty and the new emission norms in China?

A: Regarding JLR, the levy of additional import duties on luxury vehicles from April 1, will stress sales of not only JLR, but all luxury carmakers in India.

It is a shame because this slams the brakes on what was the only segment of the auto industry that was performing well. But I am very confident that the Jaguar and Land Rover brands will continue to do well against the competition.

Q: Close to 20 percent of JLR’s revenues and 40 percent JLR’s EBITDA comes from China. Can you quantify the impact of the new emission norms in China? Will the norms be a dampener for JLR's growth in China?

A: It is very difficult to forecast an estimate. Usually, when these kind of norms are implemented without any notice, then it cause a hiccup in sales and growth. But the impact of the norms are mixed along a bit of an economic downturn in China.

At the moment we are more worried about India because the economic downturn is deeper than it was in 2008 and we hope to see the government take some initiative to arrest the decline.

Q: The India passenger car business in is witnessing a steady decline in sales. How are you going to change the brand perception of Tata Motors?

A: The passenger-vehicle business in India is a different story. Our retail sales have grown month-on-month over the last few months. However, because of the dull economic environment, we have taken the steps to reduce our inventory both at the dealers' end and in the field.

Regarding the offtake, wholesale sales is not as great as the retail sales. We have to right-size our business and that is certainly one of the tasks that I have taken on.

To repair our poor brand-perception, we have made huge changes as far as our product quality is concerned.

The recent launches of Safari Storme, the Vista D90 and also the Manza Club Class have received positive reviews in the market and we have observed from the feedback provided by the initial customers, that our levels of quality are equal to the competition  in the marketplace.

But it is key to maintain focus on the customer and not just on the quality of the vehicle and that is definitely a priority on which we must not compromise as we go forward.

Q: By when do you see some kind of a turnaround in the commercial-vehicle segment?

A: The commercial vehicle buyer is not somebody that gets influenced easily and wants to see a consistent improvement in the economy before investing. We hope the economy to turnaround in 6-to 8 months.

Q: What are the initiatives you plan to restart growth and turn the company’s fortunes around?

A: It has been at least two years since we came with a new product. So, our priority is not just bringing the next new car, but to establish a continuous product refreshment cycle that recognises what is required in the market, what excites the customer and then making sure there is a system of delivery, design, engineering and manufacturing to support that.

That has been our shortcoming in the market as of today. We have good models in the market, but there has been no refreshment plan over the last few years as far as new products are concerned.