Though the previous fiscal started on a tumultuous note for the country's largest
automaker, Tata Motors' focussed improvements across its model line-up, such as
the Nano 2012 and Indica eV2, helped it return to black by the fourth quarter.
In an interview with Business Line, Mr Prakash M. Telang, Managing Director of the India Operations, talks of how the strategy would be taken forward into the new fiscal. He also talks about the changes in its marketing arrangement with Fiat, which is expected to help push the languishing sales of the Italian brand.
It's been a tough year for the auto industry. What is the outlook for FY13?
Last year the commercial vehicle (CV) growth rate came down. We were used to 25-30 per cent growth for two-three years in succession. Compared to that the growth last year came down to a low double-digit. Within that, small and light commercial vehicles grew faster than medium and heavy CVs. It's a matter of concern.
Infrastructure spends didn't move as expected and over all industrial output also came down in some sectors. A lot of restrictions came on mining, while interest rates moved up as well.
The new year (FY13) will be more challenging, but I still believe we will see some growth — on the higher side of single digits for us. Things are so uncertain at the moment, the Government will probably have to come up with some policy announcements. There is expectation that interest rates will come down. If that happens and industrial output goes up, then growth will be on the higher side for the industry.
In the passenger car segment, do you think new models will create traction?
Car sales were also flat last year for us, similar to the industry. In the second half, things were better and we expect to maintain that growth now.
We believe that there are good products that we have. When the fuel prices started to rise rapidly, we realised that fuel efficiency was a clear priority of the customer. So we worked on our vehicles and the result is the Indica eV2 and Indigo eCS. We followed that with the Nano, the first car to cross the 25 kmpl milestone in petrol. All these are giving us good traction.
New models certainly help, but if you can tweak old models also according to the customer's requirement, that also leads to higher sales.
How would you look to push sales of the Nano in 2012, after a roller coaster 2011?
The Nano 2012 is a substantially different model. Fuel efficiency has improved, we picked a lot of customer feedback on suspension, engine noise, which we incorporated. So the product is now well accepted in the market. The plan is to take the number of (solo) Nano sales points to 300, but currently we're at about 130. We're quite satisfied with the progress, we believe this is quite important.
What is the capacity utilisation across your plant right now? Will you add more capacity?
For the small commercial vehicles, we're running full in Pantnagar (Himachal Pradesh) and putting up a new plant in Dharwad (Karnataka). In the first quarter we will start making the Ace Zip there and then the Magic Iris. In heavy CVs, we did a lot of activities in the year before last, so that's in place.
On the car side, the three plants (Ranjangaon, Sanand and Pimpri) are running at 65-80 per cent of capacity. This year, we may have to do some balancing of capacity depending on where the bottlenecks are.
Tata Motors has showcased multiple electric/hybrid versions of its vehicles over the last few years.
Our view is that electric vehicles are not a solution for all environment problems. In India, if you produce electrical energy by burning fossil fuel, which is 90 per cent (of power generation), then you just shift the pollution from the streets of Mumbai to somewhere on the outskirts. We don't have as much hydro-electric or nuclear power, plus we're power deficient.
Hybrids, according to me, are a much better solution, because it is much more efficient. Typically, brake regeneration technology can charge the batteries, plus you can downsize the engine to a much smaller capacity for the same horsepower. When you combine all this with a start/stop system, it is the best for city operating conditions.
Are you planning to launch any hybrid models?
We're supplying about 24 such buses to Madrid city, some of which are CNG hybrids. In India, we're talking to many State Governments. We're working on diesel hybrid buses too.
Hybrids currently are expensive to do. In cars the acquisition cost is typically double a normal car, than in a bus where the premium you pay (for hybrid) is about 60 per cent.
The cost of components (after the Budget reducing import duties) has not come down substantially enough for hybrids to be feasible yet. We will wait and watch to see how big a support is coming (in the EV policy) and how viable it is .
We are running tests of the Indica Vista in the UK and are looking at such markets closely for a launch.
Why a separate showroom strategy for the Fiat brand?
This is misunderstood in the market place. Tata showrooms started getting overcrowded as we launched new products (Vista, Nano, Aria) over the last 2-3 years. The same showrooms can't accommodate so many products, so based on that a selective decision was taken on identifying those areas where the dealer is overcrowded. There will be the same Tata dealer with a different premise for Fiat in such cases. So in some cases, it still remains in the same showroom.