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For Tata Motors, BS-VI is about delivering value to truck buyers

Murali Gopalan | Updated on January 09, 2020 Published on January 09, 2020

Girish Wagh, President, Commercial Vehicle Business Unit, Tata Motors   -  HAND_OUT

Commercial vehicles chief Girish Wagh believes total cost of ownership is the key

Girish Wagh is only too aware that these are not the easiest of times for the commercial vehicle industry.

On one side is the prolonged economic slowdown which has spread doom and gloom across segments. On the other is the onset of Bharat Stage-VI emission norms from April 1, which will see products becoming more expensive.

“Our focus is clearly on doing what we can do rather than sulk and complain about a problem. The key is to do the best we can and wait for the external environment to improve,” says Wagh, President, Commercial Vehicle Business Unit, Tata Motors.

As he puts it, when a downturn happens and demand ends up lagging supply, it is important to stay trim. For instance, when the fall became “even more savage” from this fiscal, the company began focussing on retail and stock reduction as top priorities.

The other important zone was cash and costs, which meant a reduction in working capital. Consequently, Tata Motors is now “sitting on a healthy level of stocks” for the reduced level of volumes. Sure enough, realisations began hurting from April but the focus was on delivering better value to the customer, both on products and after-sales.

“We also continued to improve our service standards and customers began seeing the value,” continues Wagh. When production was slashed, both at plants and dealerships, retail emerged higher than wholesale numbers, which in turn exceeded production.

Greater transparency

“It was tough going but we managed it intelligently in terms of block closures while rationalising the number of shifts,” he says. There was also greater transparency with suppliers right through the transition given that retail was the new mantra and production cuts were naturally higher.

Wagh is reasonably confident that there will be some kind of revival in the short term, albeit on a sequential basis and not year-on-year. Beyond that is the big unknown of BS-VI, where vehicles will be more expensive and there could be some buying resistance as a result.

“BS-VI will have cost increases and one has to wait for the new equilibrium to be achieved,” he says. From the company’s point of view, the key is to go beyond “mere compliance” in meeting the new emission norms.

“We have also ensured that we develop vehicles which either lower the total cost of ownership (TCO) or improve revenue potential of fleet operators. In some cases, we will also add value so that customers have good reason to buy the product,” says Wagh. The top priority in BS-VI is to deliver value to the customer, which has been done across the range.

Since this is wide-ranging, from 0.5 to 49 tonnes, the work content was huge and the number of engines migrating to BS-VI immense. Likewise, there were over 130 certifications from the Pune-based ARAI owing to different aggregates/calibrations. “Our guys have done a great job,” says a visibly pleased Wagh.

In the medium and heavy space, the company has already had a positive experience with selective catalytic reduction (SCR) in BS-IV vehicles. This means that when it comes to BS-VI, there is already a sense of familiarity with this technology, translating into “a clear advantage”.

SCR technology allows the engine to operate at a more optimal combustion temperature, providing better power, fuel efficiency and lower nitrogen oxide/particulate matter generation. It is here that the experience of ally Cummins with SCR has been invaluable.

“We are just not migrating into a new emission norm but creating a new and improved product range,” says Wagh. In his view, the BS-VI experience will also give Tata Motors an opportunity to tap more markets since a “good platform” has been created to be more competitive beyond the shores of India.

The company has also looked at optional fuels beyond diesel, like CNG, especially for the intermediate and lighter range, where once again, customer value will be the guiding motto. “Eventually it is about the economic value of a fuel from the customer viewpoint,” he reiterates.

Electric is another priority and buses were delivered to six cities as part of the Centre’s FAME 1 (Faster Adoption and Manufacturing of Electric Vehicles) initiative. Tata Motors focussed on the creation of strong infrastructure and these buses have cumulatively done 1.7 million km. Wagh believes that the experience will hold the company in good stead as it gets set for FAME 2, where it hopes to garner a good share of the 5,000 buses in the tendering process.

Increasingly, more States are queuing up for electric buses in city transport and some of the more proactive ones are Uttar Pradesh, Rajasthan, Gujarat, Tamil Nadu and Karnataka.

Getting back to the current slowdown, Wagh reasons that ups and downs are an inevitable part of the CV industry even while it has been longer this time around. The down began in November 2018 and the difference this time is not due to cyclical factors alone.

Issues like tight liquidity and the increase in multi-axle load saw a fall in capacity utilisation. Quite naturally, fleet owners did not have compelling reason to buy new trucks. In addition, since April 2017, regulatory implementation has led to cost increases of the end product, which has also deterred buying.

The good news is that there are some signs of a buoyancy happening with fleet owners now “realising the economic value” of pre-buying the present range of BS-IV trucks instead of the more expensive BS-VI options. They are also keen on making the most of the accelerated depreciation scheme where the benefits can be had up to March.

According to Wagh, BS-IV vehicles have an “inherent TCO benefit” over the previous BS-III version and customers know that a replacement will help them. Tata Motors has also done its bit in this department, where it pushed the envelope in the new axle load norms. “We re-engineered the vehicle in a manner that a 37 tonne operating at 42 tonne with higher payload actually had better TCO than others in the market,” he explains. Fleet owners are beginning to appreciate this benefit and there is a distant increase in the number of enquiries.

“We are hoping that this will help gain volumes for this fiscal. We will then get into BS-VI and the onset of a new equilibrium,” says Wagh. It is not as if the enquiries will translate into an overnight boom but this is far more encouraging than the dismal state of affairs seen over the last year.

Diesel consumption has also improved in recent times, which means more vehicles are on the roads. The company has also noticed that job cards have been opened with more growth in service centres though these are early days yet. “We now need to see how many enquiries will translate into actual purchases,” says Wagh.

As part of an exercise, Tata Motors also tracks ‘transporter sentiment’ every quarter, which is a combination of the current environment and optimism about the future. While the sentiment index bottomed out in Q2 of this fiscal, Q3 has changed slightly upwards. “These data points tell me that there are some positives to look forward to,’ he adds.

Slowdown blues

Wagh makes no bones about the fact that the present slowdown is “doubtless sharp” even while the company has been doing its bit to cope “since the time we noticed it”. This has involved greater engagement with customers and dealers to understand their concerns “while remaining close to the ground for greater flexibility to change our plans”.

Additionally, it has focussed on launching new products. For instance, when the downturn began in November 2018, it was also the time when it introduced its increased axle load range. In the five-axle configuration, the company put out into the market a 48-tonne in addition to a 42-tonne and also a 49-tonne cargo in the six-axle configuration.

“We also launched specific vehicles for e-commerce. Overall, the entire exercise was about re-engineering vehicles beyond just re-badging. The idea was to give a better value to customers,” says Wagh. This credo will continue into the BS-VI era even while Tata Motors will be hoping that the current quarter sees a greater pick-up in sales.

For now, it looks as if a complete recovery will happen only in the third quarter of FY21 and thereon, given that the industry has already factored in tepid demand for the more expensive BS-VI range.

Wagh and his team will be keeping their fingers crossed that things will have settled down six months thereafter though there is no telling what could happen given the present state of global vitality. The current political tensions in West Asia, for instance, have the potential of firing up crude oil prices, which could derail the automotive industry’s growth prospects.

Published on January 09, 2020
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