Mumbai: Tata Nano, which has emerged as a weapon in the tussle between Ratan Tata and Tata Sons Ltd’s ousted chairman, has now made it to the courtrooms. Ratan Tata, chairman emeritus of Tata Sons, defends his stance on the Nano and strongly refutes allegations by ousted chairman Cyrus P. Mistry that Tata’s “persistent resistance” prevented the Nano project from being shelved.
In an affidavit filed at the National Company Law Tribunal on 6 January, Tata cited an email sent by Guenter Butscheck, managing director and chief executive of Tata Motors Ltd, to Mistry, adding that when the issue of stopping the Nano project was broached with him in a meeting, he did not raise any objections. “In light of such correspondence as recent as September 2016, it is entirely without basis for Mistry to contend that it is him who trusted the decision to continue with Nano upon the incumbent management, he added
The Nano, Tata’s pet project, has been an ammunition of the ousted chairman in his broadside with Ratan Tata. In his subsequent communique in the ongoing spat with Tata Sons, Mistry has blamed the mounting losses of Nano—cumulative losses valued at Rs6400 crore—to be the key reason for the poor financial performance of Tata Motors’s domestic operations.
In an affidavit filed at the NCLT earlier this month, Mistry accused Ratan Tata of excessive interference in matters of Tata Motors and conducting reviews with company officials directly, undermining the position of the executive chairman of Tata Sons. “Apart from aviation, his other personal passion was the automobile industry,” he said. Mistry alleged that despite being fully aware that the more Nano cars the company would produce, the higher would be the loss, Ratan Tata pushed for increasing production of the car and “pestered for a higher marketshare”, also suggesting that Tata Motors chased large orders in taxi ventures with Ola—in which Tata made an investment in his personal capacity—instead of Uber with whom Tata group was pursuing an engagement.
Dismissing the allegations, Ratan Tata in his affidavit said, “It is unfortunate that my concern for Tata Motors would be coloured with a taint of ulterior motives on my part.” Tata said he suggested that Tata Motors should talk to Ola only because he was approached by Ola’s co-founder, who told Ratan Tata that response from Tata Motors to Ola Cabs’ proposal to make bulk purchases was very slow. Ratan Tata’s only concern, which he pointed out to Mistry, was that Tata Motors should act swiftly and pursue such a proposal aggressively to improve volumes at the firm. He also added that his letter to Mistry clearly stated that the company should pursue it with Uber if it prefers the proposal with Uber.
Tata blamed Mistry for the drastic drop in the company’s passenger vehicle market share—from 13% when Tata was the chairman to 4-5% now. “It is very convenient for Mistry to allege that the losses and lack luster performance of Tata Motors is on account of the Nano, when even the present sales of the company largely comprise of the older models such as the Indica and the Indigo, with newer vehicles such as the Zest, Bolt and Tiago introduced during Misty’s tenure not contributing significantly to the sales or profit of Tata Motors.”
Mistry first made a mention of the small car and the big losses in the five-page letter to Tata Sons board on 25 October, a day after he was removed as the chairman following a boardroom coup. He said Nano’s development costs were always above the threshold in the product concept, resulting in mounting losses. “The Nano product development concept called for car below Rs1 lakh but the costs were always above this. This product has consistently lost money, peaking at Rs1,000 crore,” wrote Mistry, pointing out that “there is no line of sight to profitability for the Nano and any turnaround strategy for the company requires to shut it down. Emotional reasons alone have kept us away from this crucial decision”.
The Rs1 lakh car hit Indian roads in July 2009. More than seven years since it went on sale, the jelly-bean shaped model has failed to woo the average two-wheeler owner and first-time car buyers, as envisaged by Tata, and sales continue to dwindle year after year despite Tata Motors reinventing the strategy around the car several times. In the first nine months to fiscal 2016-17 Nano sales dropped by 61% to 6,714 units from 17,258 units in the year ago period, according to data compiled by industry lobby Society of Indian Automobile Manufacturer.