Mumbai, June 19
CAUTION dominated business analysis and outlook in the 2004-2005 annual report of Tata Motors, the country's biggest automobile company.
The Chairman of Tata Group, Mr Ratan Tata, said in his statement, "The commercial vehicles business is one of the barometers of the economy. One needs, therefore, to guard against any sense of euphoria and recognise that this business is prone to up-turns and downturns of an economic business cycle, driven by several related and unrelated factors."
He felt that the passenger car sector, by contrast, is less related to the economic variations of the country, and instead, more dependent on the market acceptance of new products, the discretionary income level of the consumer and the availability of credit.
"The unprecedented increase in steel prices and other input costs have placed considerable pressure on margins and while the industry has absorbed a major part of these costs during the year, it is most likely that the prices of passenger cars will increase, possibly having a damping effect on demand. The rising prices of fuel will undoubtedly also have an impact on the viability of the transport industry and new commercial vehicles' (CV) sales.
The report states that Tata Motors will have to aggressively reduce its costs without compromising on quality and be able to market products, which have appeal in terms of price, appearance, performance and reliability as well as good customer support.
He emphasised the need for the company to differentiate itself by developing products that service the "lower segments of the pyramid," with the recently introduced mini-truck and the proposed low-end car being such examples.
"The small car envisages some revolutionary and different means of product assembly and distribution, which could possibly be the first of its kind in the country, aimed at providing the customer with exceptional value at a very affordable cost, thus extensively expanding the target market," he noted.
In business outlook, mentioned under the report's management discussion and analysis, Tata Motors said, "though the CV industry has been growing for the last three years, the rate of growth has been declining the last two years.
This trend is expected to continue this year keeping with the cyclical nature of the industry.
"The passenger vehicle market is likely to slow down further compared to the previous year, but still maintain leading growth rates amongst the various automobile markets.
"A series of new emission and safety related norms, introduced selectively in various cities/States has brought in complexities for the automotive and component manufacturers, which could impact production/ sales for the year."