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Last Updated : Nov 22, 2019 09:51 PM IST | Source: Moneycontrol.com

Tata Motors makes a 'paradigm shift' for its dealers to beat slowdown

In the first week of October, the factory stock of Tata Motors was lowest in 82 months.

 
 
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Stirred into action by a couple of trends, Tata Motors has brought about a 'paradigm shift' in its strategy for dealers.

Tata Motors saw the biggest reduction in wholesale numbers - which it sells to dealers - compared to the rest of the industry during the past two consecutive quarters.

Car and SUV sales to its dealers slumped 41 percent to 81,500 units during April-October, resulting in the worst-ever market share for the company at 5 percent, as per data shared by the Society of Indian Automobile Manufacturers (SIAM) which publishes wholesale data.

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This prompted the fourth largest car maker to clear what it called excess inventory with the dealers for which it had to even take unscheduled production holidays during the peak of festive season.

Clearing the excess inventory has helped. In October first week, the factory stock of Tata Motors was lowest in 82 months and dealer stock on November 1 was the least in 82 months.

All this was possible because the Mumbai-based maker of Tiago and Harrier had been analysing financial details of its dealers on a monthly basis to keep track on the expenses incurred by the dealers and the margins made or the value of accessories sold per car.

Speaking to Moneycontrol, Mayank Pareek, president (passenger vehicle business unit), Tata Motors said: "Dealer gives us the monthly statement of financial performance and we examine the trends like topline and expenses in areas of manpower and rent. We saw stress back in January 2018 itself."

Dealers, who often run multiple showrooms not necessarily restricted to one city, are not required to share their financial details with their partners. About 15 percent of Tata Motors dealers did not accept the request to share their financial details.

"This analysis told us that the monthly interest burden was going up sharply. We realised that it won’t be sustainable if we just pushed inventory to dealers. We started rewarding dealers on the basis of retail (sales) from February under a new strategy called ‘paradigm shift’ under which we declared that retails have to be more than wholesales and wholesales have to be more than production," added Pareek.

Dealerships

Only last year did the company share plans of doubling its dealership count to 1500 by 2022. However due to closure of some dealerships and the overall plan running behind schedule the company will be falling well short of the target. It presently has around 865 dealerships up from 770 in February 2018.

“Some people were not able to come up to our expectation of customer centricity and business processes and naturally we had to take them out. This year we added 89 which is the highest among any existing players and by year end we will be doing 150-200”, added Pareek.

“Around 950 is what we will finish by year end and we will add another 200 by next year end. So that will take us to 1150 or so by end of 2020”, added Pareek.

The RSO model

To make the vehicle distribution process leaner the company has recently introduced the regional stock office (RSO) model. Instead of the dealer holding vehicle stocks Tata Motors will set up seven warehouses across the country. The first of such RSO has come up in Guwahati.

"We must work on lean inventory model. The dealer used to keep stock because in case a customer asks for a particular variant of a particular model in particular colour he should be having it. It took us 15-20 days to ship vehicles from Pune to Guwahati depending on the weather," added Pareek.

As against three weeks, a Tata Motors buyer will now be able to get the car of his choice in less than a week. The second such RSO will start in January and by March all the rest will be operational. Sanand, Rewari, Lucknow Hyderabad, Nagpur and Hosur will have the RSOs having capacity of 690 to 4300 units. Each of them will serve 16-48 cities.

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First Published on Nov 22, 2019 04:43 pm
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