The car industry may have been down 13 percent during the April-December period but Tata Motors still managed to outgrow every carmaker in the industry. During that nine-month period, the company clocked cumulative sales growth of 32 percent and did so with a portfolio of just five models. The company’s market share improved to 6.78 percent by the end of December from 4.98 percent at the end of FY20.
The Mumbai-based company has more than doubled production but demand continues to remain ahead of supply. This is a bit of a surprise since market awareness about the Tata Motors brand was minimal at the end of the last financial year. So, what exactly changed in 10 months? Moneycontrol spoke to Shailesh Chandra, President, Passenger Vehicle Business Unit, Tata Motors, to get the lowdown. Edited excerpts follow:
What changed between 2018-2019 and now for retail demand to be so robust?
The power of the product is at the centre of any sustainable performance. It is a combination of multiple actions, leading to very sustained performance. The ‘new forever’ range of products has a very strong association with the consumer now thanks to its safety features, stylish design, driveability and features.
Did the lockdown provide you with anything?
There were some things we did that were possible only during the pandemic. We experimented on multiple fronts. One was that in the lockdown, we gauged whether consumers would have the orientation to purchase at all and what their awareness of our portfolio was — it came out that there was a lack of awareness of Tata products. Therefore, in June, when the lockdown was lifted … we did a campaign and there was a lot of media advertising — above and below the line activities — that we started. That led to a lot of enquiries and lots of leads and that brought the velocity.
Elaborate on those please
There was also big action on the channel side because if the channel is not strong we won’t be able to unleash the power of our range. So, we took some transformative actions like improving the profitability of our dealers, made policy changes on inventory and sales target setting — where we came out with schemes like ‘sell more, earn more’. We raised dealer margins, ensuring that they gravitated towards a richer mix of sales where the margins were also high. For instance, the Harrier and Nexon are high-margin products and we tied that with schemes for the consumer. This pushed up the conversion rates.
And so that way your production got aligned to demand?
We ensured that whatever the dealer wanted got produced and that way the whole supply chain was geared to meet the demand for what was needed in the market. And this was a big step up in the ecosystem. We have only five products and if we do not unleash the full potential of these five products then we will not be able to grow. There were certain products that were not doing that well, so we brought a lot of interventions like introducing variants and rationalising prices and market schemes.
And what was the result of that?
The result was that Harrier, which was selling 700-800 units a month, started selling consistently above 2,500 a month. Tigor used to sell 500-600 a month and now it sells above 2,000 a month. Every product has seen 50 percent growth compared to last year. Nexon doubled its growth. We did a lot of action on the supply side. We have grown 2 to 2.5 times from last year. We were doing 11,000, which we had ramped up to 27,000 as of January.
How has the focus on retail helped?
If you don’t align your system and policies around retail sales, the incentive and how you assess the dealer and the sales team are of no use. Everything has to tie together to keep the focus on retail. While the industry practice is to reward off-take, we did the opposite of that. We tweaked it to the extent that there was a greater prize for retail, including the annual and monthly incentive. The sales team was assessed per the retail sales, which meant that they did not have to sit with the dealers to go after wholesales.
It's normal for dealers to be saddled with unsold inventory. How were Tata Motors dealers faring?
Teams were brought together in sales and operating planning (SNOP). We had daily meetings on the situation on the retail side. So, if we had to start from the body in white (the stage in car making when only the frame is ready) it had to be ensured that it was backed by demand from the dealer. It could be about a certain trim, colour and model. This ensured that the dealers were not locked with mismatched models. It was important that there was such an alignment between production and retail.
In which areas does Tata Motors need to improve?
We have to do a lot of transformative work on the customer experience part. There are softer skills that we need to build among sales and service executives. We have to ensure that we have a proper HR practice at dealerships so that the churn rate and attrition is arrested.
Why is the waiting period of certain models so high?
It is true that the waiting periods are high because possibly in terms of the number of days, Tata Motors is sitting with the maximum number of bookings. There has been an overwhelming response to our products — demand has trebled for Nexon specifically. We were selling 3,500-4,000 Nexons every month till last year and as of last month, we had taken this to 8,200. Supply has ramped up more than two times but demand is outpacing supply even now.
How geared up are you to manage this demand? Do you need investments?
At Tata Motors, we are absolutely comfortable and we have sufficient capacity in our plants. We are undertaking debottlenecking actions and have to make certain investments in certain factories. There are lots of actions with suppliers as well to enhance capacity.
What percentage of your sales is from rural areas?
Around 38-40 percent of our sales come from rural pockets. This would have been 42 percent earlier. That decline is in share and not in terms of growth, which has been very high in the rural segment. Urban growth has been even higher.
How do you see FY22?
I see the industry at 3-3.4 million. And in this market, we would like a double-digit market share.