Tata Motors drafts Asia-Pacific script for pickups

Tata Motors is on course with the Asia-Pacific strategy for its commercial vehicle business. Last month saw the company make known its intent for the Philippines market where the Ace and Xenon pickups will be the key ingredients in the business model.

“The last six months have seen launches in Indonesia and Australia while the next six months will be in the Philippines and Malaysia. By the end of the year, Vietnam will also be added to the list and to that extent Asia-Pacific will have been fully covered,” Ravi Pisharody, Executive Director, Commercial Vehicles, told Business Line.

A-Pac strategy From the company’s point of view, its products are largely saleable in these markets. It is also examining the potential duty benefits from the ASEAN Free Trade Area where countries in the region do not have any tariff barriers. For instance, a manufacturing base in Indonesia could help in easier flow of components to Thailand, Malaysia or Taiwan.

At present, however, the company does not have any such plans simply because the volumes may not quite justify any investments. Yet, Pisharody admits that Indonesia promises plenty going forward though the structure right now is basically a sales organisation. “This is a country we are dead serious about but finally it all depends on critical mass and volumes,” he says.

Tata Motors already has an engine plant in Thailand for pickups. According to Pisharody, there are plans to increase this product category’s presence in ASEAN though there are challenges in catering to exclusive left-hand-drive markets like Vietnam as well as right-hand-drive in Thailand.

Tata Daewoo Commercial Vehicles fits the bill for its home market in Korea. Daewoo, Pisharody says, is an aspirational brand which is preferred in some markets like Algeria where it is “hot property”. In South Africa and Bangladesh, the company has assembly plants.

“Our vehicles are known to be rugged and strong and if you look at the typical emerging markets profile, they are perfect. And when it comes to design, the styling is globally at par,” Pisharody says. Australia is the fifth largest for pickups and this is where the Xenon fits the bill perfectly.

For Tata Motors, the strategy for Asia-Pacific, Africa and the Middle-East is in place while Latin America is on its radar with Brazil, in particular, being “the big one out there”. The Middle-East is already buying Prima trucks and the business opportunities here look promising. “The thrust is to push exports and the internal target is to grow from 50,000 to 150,000 units in about four years,” Pisharody says.

Temporary lull Back home, the prolonged slowdown in CV sales is worrying though the industry believes that things will start happening when the economy picks up and a new Government creates the right policies to revive growth. It is no secret that investments have slowed down over the last three years and the economic slowdown is hurting CV makers.

In addition, there are issues like resale/replacements in CVs which traditionally fetch good value for operators. “Operators will naturally get jittery when the delay continues and this is why there is a need for some trigger to get the replacement momentum started again,” Pisharody says.

One of the secondary impacts of a long-term recession is financing. In CVs, the monthly instalments are paid from the (monthly) income of operators and this slowdown has seen financiers face defaults when vehicles stopped operating. This further decline should hopefully be over by July.

Tata Motors and other CV makers believe the earliest a revival will occur is in the second half of the year when the new Government is in place. There is general unanimity within the industry that this slowdown is an India-induced problem. January-March is generally a good year for CVs and is not expected to be different with the dawn of 2015.

Pisharody does not believe the El Nino phenomenon will affect CVs since the business is not linked to agriculture and is more in line with activities like mining and construction.

“One priority is growth and also maintain our market share of 60 per cent plus. The India growth story will come back at some point and there is confidence that this lull will be over soon,” he says.

Tata Motors is also continuing with its product investments and is especially upbeat on the Prima Ultra trucks which will see a series of light products coming out of the platform this fiscal.

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