While Tata Motors’ passenger vehicle division has been basking in the limelight of high consumer demand for many months, it’s now the turn of the commercial vehicle division to make noise. After all, 70 percent of the company’s standalone revenue comes from selling trucks and buses.
The focus for Tata Motors, therefore, is to grab a slice of the pie of future-generation vehicles such as electric and hydrogen trucks. Tata Motors is already the biggest supplier of electric buses in the country. Moneycontrol spoke to Girish Wagh, President, Commercial Vehicle Business unit, Tata Motors, to find out about the company’s plans to win back market share, among other things. Edited excerpts:
We are in the final quarter of the year. How was FY21 for you?
The first quarter saw a 23.9 percent decline and then narrowed to a single digit in the second quarter. The third quarter was low-single-digit positive and the fourth quarter is going to be positive as well. The projection for GDP growth for next year is double-digit growth. Commercial vehicle demand correlates with GDP growth and therefore we should be seeing a better year ahead of us.
Which sector was the first to bounce back?
The e-commerce segment was doing well because the lockdown made consumers order from home. Rural demand also picked up; the mining sector, construction and infrastructure projects pushed up demand for tippers. This is a good rebound. Of course, the volumes are lower than the peak we had seen in FY19.
Which product segments are doing well and which segments are lagging behind?
During this year, small commercial vehicles picked up the fastest. This was followed by intermediate and medium commercial vehicles and then ultimately by the heavy segment. But buses are showing a heavy decline because schools are yet to open, employees are still working from home to a large extent and the travel and tourism sector has been badly hit.
With demand building up slowly and still uncertain, how are you managing production at your plants?
In a situation like this, where the capacity utilisation rate is low, the focus is always on ensuring the highest efficiency. So, we are ensuring that we deliver the required output in a minimum number of shifts, which will lead to the best efficiency. We have a sales and operations planning meeting almost daily because the situation is quite dynamic.
How many years will it take for the market to reach peak levels?
Generally, it has taken 3-6 years to achieve peak sales. In a good cycle, the peak can be scaled in three years but that happened only once. The last peak was in FY19. It all depends on how the economy grows. If it grows the current way then we should scale the peak faster.
Did you have to undertake any cutback in investments?
About three years ago, we were in the midst of the BS-6 transition, which entailed a very high level of capex (capital expenditure). As we entered this year, the level of uncertainty was high and nobody knew how the year would pan out. So, we decided to look at capex on a quarterly basis and also to take some tough calls on cash conservation and cost reduction. We looked at improving the product competitiveness, looked at white-space areas and also started work on BS-6 phase 2.
What are your future plans for electrification?
After city passenger transportation, the small commercial vehicle in last-mile distribution lends itself well to electrification. There are a few e-commerce customers with whom we are holding discussions because they have this on their agenda. Cost of batteries is coming down and the cost of IC engine vehicles has been going up due to stringent regulatory norms.
Are you in talks with your clients for EVs?
There are a few forward-looking customers who want to experiment with electric vehicles and we are working with them, partnering with them to provide a whole solution rather than just the product. We are looking forward to getting into this segment.
Your market share has been under pressure. What will your strategy be to tackle that challenge?
In the intermediate and light segment and also in the medium and heavy commercial vehicle segment, we have been growing our share. Where we saw a drop in market share was small commercial vehicles and pickups and one of the reasons for this has been the overdependence on one model, Ace. Rural reach has been an area of improvement. We are getting into an aggressive sales network expansion focussed on small commercial vehicles, where we should start recovering our share. We are looking at market share improvement segment by segment.
After EVs, the government’s next focus area seems to be hydrogen. Is Tata Motors working on that?
A stable regulatory and alternate fuel roadmap is very important so that we can allocate our capital accordingly. Electrification is going to be the way forward and here there are two types of technology available — battery electric and fuel cell. Battery electric is suitable for a low range, about 300-400 km or below. For ranges above that it better to go with fuel-cell technology. We have been working on hydrogen fuel technology; recently a government agency came up with a tender for such vehicles and we participated in that.