Companies

Nano obsession put the brakes on Tata Motors

| | | Updated on: Oct 24, 2016
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While rivals launched 48 models from 2009 to 2014, the company could not come up with even a single one

Its inability to grab market share — or even hold on to what it had — has made Tata Motors one of the worst performers within the Tata Group, under Cyrus Mistry.

Tata Motors’ poor performance was due to a mix of unfavourable market conditions and the company’s inability to cash in on the fastest growing segments.

After Mistry took over the Tata Group in 2012, the commercial automobile segment witnessed its biggest downturn, declining by over 25 per cent year-over-year from 2012 to 2014.

Nano disaster

With commercial vehicles being the cash cow for segment leader Tata Motors, the results weighed heavily on the company. “To add to the woes, the big bet that Ratan Tata had put on Nano had already sucked all the resources from the company, which, instead of focusing on multiple car segments seemed obsessed with the cheapest car in the country,” said an analyst at a Mumbai-based brokerage, who did not want to be quoted.

Nano sales turned into a disaster for Tata. While other auto companies launched 48 models in the personal vehicles segment from 2009 to 2014, Tata could not come up with even a single offering.

In 2014, Tata Motors finally came out with the Bolt hatchback and Zest mini-sedan, both of which failed to meet market expectations. Tata Motors also failed to focus on the most lucrative and fastest growing segment — the mini SUV segment.

Mini SUV Ford Ecosport changed the fortunes for Ford Motors in India, while the Renault Duster and Hyundai Creta also helped the two foreign carmakers rake in more than Tata’s entire personal vehicle portfolio.

JLR to the rescue

The saving grace for the company was its 2008 acquisition of Jaguar Land Rover. The group made JLR one of the biggest corporate turnaround stories globally.

Even today, JLR numbers have been helping Tata Motors stay afloat. But even there, the company is facing troubles in China.

The consolidated revenues for Tata Motors in 2011-12 were ₹165,654 crore, growing 35.6 per cent over last year. Today, the growth has slowed to 5 per cent, with revenue in 2015-16 at ₹2,75,561 crore.

What’s more important is the profitability. While Tata Motors has been able to maintain its EBITDA margins at over 14 per cent in the last four years, profit after tax has gone down to ₹11,024 crore in 2015-16 from ₹13,517 crore in 2011-12.

In the midst of all this, the company’s market share has declined to 13.1 per cent from 25.2 per cent in 2012.

On the brighter side, Tata Motors’ recently launched Tiago hatchback is now the biggest success for the company in many years.

Upcoming models such as the Hexa and Nexon SUVs should be able to help the company improve its offerings, and perhaps, regain some of the lost market share.

Published on January 16, 2018

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