Reviving Tata Motors


Just read the Economic Times story – Slym Adds Muscle to Tata Motors Revival – on the current woes of Tata Motors. The story identified the following problems that beset Tata Motors:

1. Fierce competition leading to declining market shares in both passenger cars and trucks.

2. BVR Subbu, an industry veteran, felt that ‘Tata Motors’ products have not kept pace with the changes in the marketplace.’

3. Deepak Rathore pointed out that poor quality and an empty product pipeline have been contributing factors.

Karl Slym, the new head of Tata Motors is making organisational changes to make the company more swift-footed. Also, a premium hatchback and some new truck models are on the anvil. The new head of the Tata Group – Cyrus Mistry – bravely proclaimed, ‘It’s time to meet them (global rivals) and beat them in their own backyard.’

I am afraid that Tata Motors’ problems are not going to disappear so easily. According to me, there are two major problems that the company faces:

1. The lack of a clear strategy, especially in the car segment. A good strategy is all about focus, about deciding which segment Tata Motors will operate in. The relative success of Mahindra, to my mind, is due to the fact that the company concentrated on the SUV/MUV segment rather than on the sedan and hatchback segments which are highly competitive.

2. The bigger problem is the perception of Tata Motors in the minds of car owners and potential car buyers. Tata cars have an extremely poor perception – that of a ‘taxiwallah’ brand – especially in Delhi and the northern part of the country. This perception is due to a large number of Indicas being used as cabs. Negative perceptions are extremely difficult to shake off and the eradication problem will require some careful thinking (and time).

Tata had a great thing going with the Nano but screwed that up by almost exclusively concentrating on the low price (sub- Rs. 1 lakh) rather than positioning the brand as the newer, smarter way of driving a first car or owning a second. The huge PR was almost exclusively on price.

I am no auto expert but if I had to recommend a future strategy for Tata Motors, this would be it:

1. Decide which segment the company will operate in. Operating across all price and category segments is not a smart strategy – some sacrifices will have to be made. Again, off the cuff, I would recommend the SUV/MUV and the A3 – A4 segments (mid-size and executive segments). Even this is pretty broad and the more narrowly focussed Tata Motors will be, the better. The target consumer could be the young, smart executive.

2. If the above is the strategy, then it would be critical to phase out the Indica – it may be a large seller but comes with negative baggage that will forever pull the Tata image down.

I have held the belief for a very long time that Tata should just have stayed in trucks and made some really kick-ass models in this segment. However, now that the company is in cars and is unlikely to let go of that segment, it would be prudent of them to concentrate on a narrow, mid-level to high-level segment and make some really good cars to re-position themselves as the makers of cars that are better than what Maruti (and Hyundai) have to offer.

The above analysis is very sketchy and one needs to study the market carefully to come out with more definitive recommendations.

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This article was written by Subhash

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