Tata Motors gears up for next growth phase in cars

Friday is extra special for Mayank Pareek.

At the gong of 9 am, the President of Tata Motors’ Passenger Vehicles Business Unit kicks off an exercise at the Pune plant with a whole bunch of charged participants. This is dead serious work where all of them are working on the Turnaround 2.0 plan for passenger cars.

Keeping Pareek company are over 1,000 employees who are part of the vehicle modular teams (VMTs). Each of these has a group leader or a Centre of Competence (CoC) Head who navigates them in the exercise of achieving cost targets.

There are 24 VMTs with around 20-50 employees in each team focussed on hardcore engineering work. They are entrusted with the task of coming up with solutions like fewer/lighter components, cost-effective alternatives for parts in the car and so on.

One of the more recent exercises saw a young engineer come up with a solution to reduce the number of parts in an exhaust system. He has barely been with the company two years and this made it doubly impressive. “I hugged him,” recalls a visibly elated Pareek who makes it a point to reward such achievers.

Focus on cost cutting

Needless to say, all participants are kicked about winning and the atmosphere at Pune is intense during the Friday drill. Everyone is also aware that this is a serious exercise, intended to cut costs and readying Tata Motors for the next phase of growth in passenger cars.

What is also reassuring is the visible change from initial scepticism to a large pool of “100 per cent believers”. Pareek narrates the instance when one particular team was behind targets and the COC promised him that this would be the last time it ever happened.

“He has kept his promise and they are now ahead of target. They are supercharged now and I compliment him each time,” he says. Clearly, the effort is paying off big time with this year’s cost cutting estimated to be at least five times more than “whatever we have done anytime in the past”.

Pareek is delighted with the effort and says it is clear that everyone is putting his/her heart and soul into the effort simply because they want it to work. They are proud of their company and keen that it grows from strength to strength.

As he adds, it is extremely important to get the cost structure right and this is where Tata Motors is pulling out all the stops this year. And as much as products and marketing are critical at the front end, what “happens behind the curtain is as important if not more”.

From the company’s point of view, all this boils down to sustainability where “you are lean and thin to be able to win forever” and are not dependent on the vagaries of the market. More importantly, a competitive cost structure means that there is no need to go in for discounts and destroy a brand.

The exercise is all the more relevant considering that Tata Motors is now moving towards just two platforms (Alpha and Omega), which can roll out a slew of vehicles right from sedans and hatchbacks to MPVs and SUVs.

Today, there are seven platforms and costs typically go through the roof without any economies of scale. To that extent, this marathon exercise now underway will be in sync with the architecture strategy. “Turnaround 2.0 will make us fitter and we will go for the kill,” says an upbeat Pareek. Something similar has been created for marketing too, with product module teams and is working well.

All this fits in well with the slogan ‘Win Sustainably’, which is about consistency and just not excelling in a particular month, quarter or year. This is where an effective cost structure becomes critical at the back end while fixing the front end is no less important.

Ahead of the curve

“Today, there are results to show as we have outperformed the markets for the last 27 months,” says Pareek.

He then drives home the point showing how Tata Motors grew by 21 per cent in FY ’17 outpacing the market, which showed nine per cent growth.

Likewise, in FY ’18, it was 22 per cent versus seven per cent while the first two months of the current fiscal have seen the market grow by 13 per cent to Tata Motors’ 43 per cent.

“We are the fourth largest player now and growing,” says Pareek while clearly indicating that the argument of a low base does not hold water any longer. Till about two years back, the extent of market coverage was around 50 per cent, which has since increased to over 70 per cent with products like Nexon, Hexa, Tiago and Tigor.

“In two years and two months, we have launched four new brand names, which have increased the market span with real hot segments,” he says.

During this time, the network has also grown from 400 to 746 outlets and slated to touch 850 by this year-end. This will further increase to 1,000-plus by the end of 2019.

Friendly dealers

Pareek explains that it is important for sales executives to reach out to customers and build the concept of the friendly neighbourhood dealer.

The other important aspect is to “have your feet on the street” in terms of actually selling cars and talking to customers.

This is where training becomes important and it was not the easiest of tasks considering that dealers were only selling to fleet customers till not so long ago.

Individual customers are a different ballgame, continues Pareek, since they have nearly three cars in their mind already, which means “your offering is one-third” in terms of probability.

It is here that smart selling becomes important where executives convince customers through softer skills.

For a fleet customer, the deal is closed in a day or two but this could go up to 60 days for individual buyers. Clearly, all the training is paying off though the best is yet to come.

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