Aim to launch 1 new model each yr in long term: Tata Motors

Moneycontrol Bureau

There are gaps in Tata Motors' product portfolio in the domestic passenger vehicle market, Karl Slym, the company's MD acknowledged on Thursday. He said the company will aim to launch one new product each year in the long-term to bridge this gap.

The passenger car industry in India has been hit hard over the last one year as customers are not buying new cars due to expensive loans and rising fuel prices. But Tata Motors has been hit a lot harder, due to what many claim has been a lack of any significant new launch over the last few years.

The company has been keen to address that and appointed Karl Slym (earlier at General Motors) as its MD in August 2012. Last week, the company launched 8 new products, but all of them were only upgrades or variants of their existing products.

In comparison, there have been several new launches by competitors. Ford launched the Ecosport compact SUV on Wednesday. Chevrolet over the last few months has launched the Sail sedan and Enjoy MPV and Honda launched the diesel compact sedan Amaze among several other launches by car makers.

Slym told CNBC-TV18 that Tata Motors has a portfolio plan until 2020, and it will include new products in the medium-to-long term.

It aims to launch one new product each year in the long-term, he said.

An entirely new product from Tata Motors stable is expected sometime in 2015, till then the company will have to continue with refreshing its existing products.

While its domestic passenger car business has remained sluggish, Slym remained confident of continued strong double-digit growth at its British luxury Jaguar Land Rover unit.

On the commercial vehicle front, Slym said that the company has grown market share (now at 62 percent) despite new players entering the Indian market. However, the overall sluggish growth in the medium and heavy truck market (down 40 percent year-on-year) is expected to continue until there is a pickup in the overall economy.

Big fleet operators still have unutilised capacity and until that is filled, they are not going to go out and buy new trucks, Slym said.

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Below is the verbatim transcript of  Karl Slym's interview to CNBC-TV18

Q: Let me start by asking you to lay out a road map of sorts on where you see the passenger vehicle business domestically headed for Tata Motors and what kind of levers you have in place to increase your market share, something that is a stated objective for Tata Motors but hasn’t quite panned out yet?

A: We had a major launch last week under the banner of Horizonext. That really pulled together all the planning that we have been doing as far as preparation for our passenger car business is considered.

It is quite a testy market for us at the moment globally, but even more so in India. We launched the Horizonext after all this planning on four pillars, on the product, quality, service and sales side. Those were the four pillars we have worked on in preparation over the past and launched that just last week. So, it was quite an exiting point in time for us.

Q: What has got the market or your investors a bit worried over the last few days is the data coming out of China which is an important market for JLR? Would you be able to assure your investors that this does not have any great ramifications for JLR sales outlook there or do you think it is material data which might affect your sales there?

A: We are incredibly well positioned in China from a JLR point of view. We have already seen great growth even while we saw tension in the market for other manufacturers. We saw a double digit growth as far as JLR was concerned. During the last year we have got great products rolling out this year and great product portfolio. We have talked very openly about our Pounds 2.75 billion worth of spend on our product portfolio both on Jaguar and on the Land Rover side.

Now of course we have our joint venture (JV) that is really starting to gain momentum in all of our manufacturing there as well soon with that JV party. So we are booking the trend as far as what is happening in China and it is not by chance, it is by our product and by our plans with China as well.

Q: JLR actually has been the bright spot or the jewel in your crown. You would concede yourself that Tata Motor’s performance in the domestic passenger vehicle market has not been encouraging. Would you be looking at a complete product out here including phasing out the Nano which has not been successful?

A: We have two jewels in the crown. Jaguar and Land Rover is the one that gets all the attention, but actually the less attractive part of our business may be from your side is the commercial vehicle (CV) business. We still have 62 percent market share since additional players have come to India then our market share has grown. So, we should also consider 62 percent market share and the kind of growth and portfolio we have in the CV business also to be our second jewel.

Let us get to passenger vehicle. It is very clear we have some gaps in the portfolio and it is very important that we fix that. Part of Horizonnext last week talked about the fact that we have now solidified a new product portfolio plan out until 2020. So, it is not short-term. It is short, medium and long and that includes filling in some of the gaps that are there as far as our passenger car portfolio is concerned.

I think Nano is a canvas for us to continue to paint and I really look forward to some exciting things as we go through and progress with Nano. Certainly it won't be something that we are looking to take out of the portfolio, it is something to use and develop in the portfolio.

Q: But none of that includes any new launches from the company which some people see as quite a negative. Most of your launches are beefed up versions of existing models. You have nothing in what is seen as the highest growing category which is the compact SUVs. Are there any new launches that Tata Motors hopes to do or introduce into the passenger vehicle market?

A: Of course when we are talking about a portfolio until 2020 that includes a whole lot of new launches in segments where we currently are and also in segments where we are missing. We had a three pronged approach. Within the first few months we were able to take all of the customer comments about current product portfolio. Last week we launched 8 products across five platforms taking into account those feedbacks. Also ensuring that we have got building on the strengths of those products but also taking the feedback around elements that needed to be changed, etc.

So, that is what we are doing in the short-term, those eight products we launched last week including our Emax range which takes us into CNG across our portfolio as well.

So, in the short period of time that we had I am very pleased and the feedback is also being very pleasing on those vehicles. In the medium term that brings new products into different segments and then the long-term is what is really required in our business that is clear especially in a market like India. It is an on growing portfolio where we would expect to see at least one launch every year as we continue our business.

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Q: I want to switch back to China where in May you have registered a growth of 11 percent, much lower than your usual run rate or your run rate last year of anywhere over 25 percent. Can you set out any targets or comfortable levels where you think the run rate for China might be at? Do you expect to see this 11-12 percent kind of growth or do you expect that to be upped over the course of the next few months?

A: If we think about the kind of products that we have come with into the market now both in Jaguar and Land Rover side then we expect not only to get our normal growth which is just growth in the overall brand in the market but then it will be additional growth as we bring new products into new segments etc.

So, if you look at the product portfolio for JLR it is very impressive both in China and globally. Therefore specifically for China current growth rates on product portfolio and then additional growth as new products enter new segments that are not currently covered in the China market.

Q: You surprised the market with almost 18 percent volume growth in JLR in FY13. Do you think you can hold on to that kind of scorching pace this year as well if not high double digits but middling double digit kind of growth in volumes?

A: We are very confident on that. In a segment where JLR plays then it really is about the brand and the brand is really based upon the product portfolio and the products that we delivered to the market. It has been great that we have been able to see the kind of enthusiasm that both brands have brought to the consumer.

In every country that we have started business we haven't seen a great result from that. So that has really helped. The fact that we are a brand going to new countries, launching new vehicles into new segments of new countries and the brand continues to grow as well at the same time.

That obviously all three put together gives us great confidence about the kind of growth that we will see over not only this year, but over the foreseeable future. We have 2.75 billion pounds that are invested in our product portfolio just this year alone, FY14 and that shows our commitment to the product portfolio.

Q: To the other jewel in your crown, it has not been a profitable jewel because of the way the industry has been panning out. By when do you think the CV business starts generating some profits or do you see many quarters where this kind of dichotomy in performance continues? JLR delivers good margins but some of it is taken away by the performance of the domestic business.

A: Our domestic business is split into two halves, the passenger car business and the CV business. CV continues to grow as far as market share is concerned at the end of last year and also at the beginning of this financial year. However, the medium and heavy CV (M&HCV) duty segment is obviously the big revenue generator and a very important piece of our business.

What makes me concerned about the M&HCV side is that if we just look year-on-year that segment is down 40 percent. When we think about what M&HCV is it is mining, infrastructure development, it is moving the goods and services around India. So, while for us it is obviously a concern and for our fellow M&HCV duty vehicle manufactures as well here in India, I think is a bigger concern for India and the fact that the economy is reflected in how well that segment is doing.

When we talk to fleet operators their fleets are not utilized fully at this moment. They don't see any confidence coming from the government as far as actions to be able to bring some catalyst back to their business. There is no hope on the mining, infrastructure and the rupee as well is causing lack of activity in that area.

So, I really don't see any urgent response to be able to put some confidence back into the area. Those people aren’t single truck owners, those people are fleet owners going to want to see their fleet utilised for some period of time before they get back into the purchasing frame of mind.

I think that is a big concern for India’s economy. When that kind of result is what we are seeing in that M&HCV business. So, yes it is bothersome for me but more bothersome from the overall economic outlook.

Q: This year has seen some game changing launches in the passenger vehicle segment. By when does Tata Motors intend to make a new launch in the market?

A: We have a very strong brand whether it is Tata or Tata Motors. So, if you just refer to the products that you just mentioned they are not brands. We have had a long positive psyche particularly one of them in the history of the Indian consumer.

So, it is based on the product, we have a history of bringing great products to the market all the way back to when we started SUV business and then we started into the passenger car business, etc.

We have a history of bringing great cars to the market and making the kind of game changing points you mentioned most recently and that will be back with us in the very near future and will remain with us. It is important that a portfolio continues to deliver vehicles on an annual basis. We are in a very vibrant market, we have a very vibrant industry where we make cars and trucks.

So, it is very important for us to generate the interest on an annual basis with new products, new offerings as well. We do recognize the importance of new launches and that will be part of our ongoing business model.