The financial year gone by has been a stellar one for Tata Motors. What were the factors that led to this outstanding performance? Does this meet the expectations you had when the year started?
On the Indian operations side, the commercial vehicles business has performed according to expectations. Demand was stronger than anticipated, which gave us a few hiccups with supplies. Some of our component suppliers could not deliver what we needed and that left us struggling; over the year this cost us somewhat in volume and market share.
Our passenger car business clearly has its share of challenges right now. We have, basically, set up a new sales organisation and we are massively improving our cost position and our quality. The Indica and the Indigo are continuing to do well, but we are working on enhancing market coverage here. We have recruited a substantial number of field personnel to improve our reach and our ability to interact with our dealers.
Could you tell us a bit more about the JLR surge? Were you ready to deal with it?
Besides, a lot of the efforts that had been initiated years ago — margin improvement, product improvement, cost reduction, etc — contributed to ultimately making it a very good year for JLR in terms of margins. Also, in a supply-constrained environment, you don’t need to provide any sales incentives and this helped.
As for JLR in India, I have just been to the opening of a new showroom in Kolkata and I found people extremely enthusiastic about Jaguar and Land Rover. I think both brands fit well in this country and there is this Indian sympathy for all things British, in the wider sense. People like the brands and what they represent; they have a natural relationship with them.
I foresee JLR’s brands doing well in the premium segment in India. The question is about how big this will be. The premium segment has 15,000-20,000 units a year in sales right now and it is estimated that this figure could go up to 200,000 in 10 years. We want to have a significant share of that and I think we will have it. That makes India one of the larger markets for JLR in the future, not next year but over the course of this decade.
There has been talk about increasing synergies between JLR and Tata Motors, and how this will help both companies.
However, we do see some areas of collaboration — synergies is an overused word — of learning on both sides. Tata Motors definitely can help JLR access India as a centre for low-cost components, services and assembly. Similarly, Tata Motors has easy access to experts in the UK when it has to address technical issues. Our approach is to define specific joint projects, which benefit both sides.
Moving on now, what next for the Nano?
Our ambitions definitely go beyond the 9,000 figure but for this we have to recruit more sales people and / or recruit more dealers. This is difficult and it is quite an effort. These people have to be taught the art of selling. What we now have to do basically is build a sales organisation for the Nano, almost from scratch, and that takes a bit of time. Finding people is not the problem; finding the right people, training them and then retaining them is what is proving to be challenging.
As for taking the Nano to European markets, the vehicle has to be reengineered before that happens; this will take about two more years.
There has been plenty of effort and intent, but Tata Motors is still some way behind the market leader in the passenger vehicles business in India. What will it take for the company to bridge this gap? Do you expect this bridging to happen anytime soon?
Maruti Suzuki has good products and, more tellingly, an equally good sales network. Our endeavour is to improve the quality of our products and the reach of our dealer network, for the Nano and for our other products.
Is Tata Motors any closer to breaking the cyclical-demand circle that sometimes seems to be the bane of automobile manufacturing companies?
We have to be prepared and we can begin to do that keeping our break-even figure as low as possible. That has to be our focus, because these intense, unexpected events that rock the world are near impossible to foresee. For instance, we escaped by a hair’s breadth from facing a huge set of supply issues in the aftermath of the tsunami that devastated Japan. I think it’s safe to assume that these events will hit us, somehow, somewhere. We have to make our company more robust.
What other challenges does Tata Motors face, domestically and internationally, as it continues on its globalisation journey?
Internationally, for commercial vehicles, we are not a known brand, so making ourselves better known to people in certain markets, picking the right markets and competing in these markets successfully — these are the challenges. Customers are not waiting for us in many of these international markets, given that they are already well served there.
The passenger cars segment is for us a less mature business than commercial vehicles. I think we have to further strengthen our organisation here in terms of our capability to deliver high-quality products to our customers, to extend our reach and to build the reputation of our brand.
How does Tata Motors see itself evolving over the next five years? What are the company’s plans and projections?
If you look at the landscape, everybody is expecting some of the Chinese automakers to become global players. I think Tata Motors will be the one recognised, global automotive manufacturer from India.
This interview is a part of the cover story of the August 2011 issue of Tata Review in which ten Tata CEOs talk about the past, present and prospects of the companies they head: