The Hindu Business Line : ‘Internal financing, new launches will be our focus’

Mumbai, May 29 Tata Motors, which reported a six per cent growth in net profit in last fiscal, said the current year would be a difficult one for the auto industry including the company. Rising input costs, growing competition and other constraints make the road ahead more challenging for the company, which plans to launch its Rs 1 lakh car later this year.

Mr Ravi Kant, Managing Director, Tata Motors, spoke to Business Line on the company’s strategy to face the challenges. (Tata Motors’s shares of face value Rs 10 closed on the NSE 8.2 per cent down today at Rs 583.35, against yesterday’s close of Rs 635.55.) Excerpts:

You said yesterday that it is going to be a challenging year ahead for the auto industry. What would be Tata Motors’s strategy to counter the challenges?

We would focus on two key areas. One is vehicle finance. Outside financiers are either exiting this sector or reducing their exposure. We will have to increase our internal financing. Tata Motor Finance Ltd, our vehicle financing arm, finances around 33 per cent of our sales. We will step up this internal financing.

Two, launch of new vehicles. We have a host of products in the pipeline some of them got delayed last year. We will introduce them this year. Also we will introduce alternative fuel (CNG) vehicles. This, I hope will excite the market and keep up the demand for our products.

With input costs galloping, will you be able to hold the Rs 1 lakh tag for Nano?

It is better for us to wait till the launch of the product and announce the price. Our objective is still Rs 1 lakh. (Nano is scheduled to be launched in October-November this year). But I think, Nano would be more attractive in the current scenario and more people will buy small cars.

Are component manufacturers asking for a higher price?

This is not just for Nano, it is for all vehicles. Component suppliers are our long-term partners. We understand their problem, they understand our problem. We will have to jointly find a solution to go through this difficult situation.

What about the progress at the Singur project?

Our Singur project is getting into place. A lot of work has been done. We are trying our best. We are carrying on.

Why did you choose to go in for issue of differential voting shares, as part of your fund raising plans?

We thought, under the circumstances, perhaps, this is a good solution. Some investors are interested in return rather than voting rights. Such investors will be interested in such shares.

Will you be offering such shares at a lower price?

I cannot say anything at the moment. We will take into account market realities.

We will take adequate and necessary steps. It will be separate a class of shares.

You are planning to raise more equity capital. Though it may be the cheapest source of fund, how do you see shareholder reaction?

I can’t say. It has just been announced. It is too early for us to comment on that. I can’t say what would be the investor reaction.

How do you plan to fund your other projects? Will you go in for more debt?

We have not finalised any plans. If there is a need, we will go for it. For our commercial vehicle plant modernisation, we will go for internal generations.

Fuel crisis has become a reality. Tyre and steel prices are also going up. How are you going to address it?

It is very difficult to answer these questions. I don’t know what impact it will have and how it will affect us. Let’s see how much of it can be countered. If input cost goes up so much, you cannot counter it just by increasing the vehicle prices.

How do you look at exports?

In exports also there are challenges. Rupee has strengthened. Therefore, our export realisation may not be that great. We are consolidating in the markets where we are operating. For example, in markets like South Africa. We are looking at Latin America. But, right now we don’t have specific plans for that market.

What about your foray into the US market?

Right now we have no presence at all in the US. (The company reportedly has plans to launch electric version of Ace in the US.) Ace-electric is for a niche segment. Don’t take it as our foray into US. Some party wanted some special vehicle and we said yes.

The commercial vehicle segment is getting hotter with competition. At least three international joint ventures are coming up. How are you going to face this challenge?

We thought about this challenge not now but seven years ago. That is why we are coming out with World Trucks. It will be equivalent to any international brand in power, torque and safety. Post takeover, will you bring Jaguar and Land Rover brands to India?

That is for JLR to decide when they are going to sell their vehicles in India. We are not going to force them to do so.