Can Tata Motors get its groove back?


New Delhi: Deep losses and disastrous sales. Poor service, dealer relations and brand perception. Frequent leadership changes. Stunted global dreams. You name it. In the past few years, Tata Motors Ltd has seen it all.

For a company that got too many things wrong in the car market, Tata Motors has finally got something right with its newest hatchback: the Tiago.

Not that everything was right with the Tiago, either. The car, originally badged Zica, had to be renamed at the last minute after tropical epidemic Zika hit the headlines just ahead of its launch.

Yet, customers couldn’t care less, since for Rs.3.2 lakh, they got a B-segment car that was Rs.32,000 cheaper than A-segment leader Maruti Alto K10 and Rs.1.3 lakh cheaper than the slightly larger, best-seller Wagon R.

With 1 lakh enquires in a month since launch and more than 15,000 bookings by the end of April, the Tiago is off to a good start—by Tata Motors standards.

The seeming early success of Tiago appears a good omen for Guenter Butschek, who took over as chief executive officer and managing director of Tata Motors, India’s largest automobile company, in January. Yet, work has barely started for the 55-year-old German executive, who was previously chief operating officer at Airbus Group SA and a Daimler AG veteran.

Guenter Butschek, chief executive and managing director of Tata Motors.

Guenter Butschek, chief executive and managing director of Tata Motors.

“There is an inner passion to improve, at the core of each individual associated with Tata Motors,” Butschek wrote in an email interview. “We need to take the positive energy within the company in the right direction to make sure there is engagement with purpose, and I am confident this will result in new horizons for Tata Motors.”

It will definitely take much more than passion and positivity to fill Tata Motors’ sails.

The decline

Once hailed for the Indica and Nano, Tata Motors has been steadily pushed to the margins of the Indian car market, recording a stand-alone loss of Rs.4,739 crore in the year ended 31 March 2015. (The company will declare its 2015-16 earnings on 30 May.) At the company’s cash cow—the commercial vehicles unit—sales have suffered due to a prolonged economic slowdown. After declining 8.64% in 2014-15, Tata’s commercial vehicle sales in 2015-16 grew 4.76% to 304,256 units from the year-ago period. In 2010-11, it had sold 393,145 units, up 21.48% from the previous year.

During the fiscal year ended 31 March, the company’s car sales declined 7.69% to 149,420 units, while the industry grew 7.24% to 2.78 million units.

Butschek admits that the company “did lose some of the momentum” in the second half of the year, but adds there is a great product pipeline ahead, as seen in the response to its cars at the Auto Expo held in February.

Even 10 years after former chairman Ratan Tata kicked off a personal mission to turn the company into a global auto conglomerate, Tata Motors failed to make much headway in the domestic car market. Between 2010-11 and 2015-16, the company’s market share shrank from 13.97% to 5.35%. Hyundai Motor India Ltd, Tata’s nearest competitor, had a lead of 7,191 units in 2010-11; by 2014-15, the lead had widened to 334,904 units.

Jaguar and Land Rover (JLR), the blue-chip British automobile brands that Tata Motors acquired in 2008 when the group was led by then chairman Tata, have helped the company grow its consolidated revenues seven times between 2008 and 2015. However, a slowdown in China, its biggest market, has put pressure on the two brands.

Yet, despite the support from JLR, Tata Motors is far from the kind of global behemoth that Tata and Ravi Kant, the company’s former vice-chairman, wanted it to be.

According to Abdul Majeed, partner and national auto practice leader with Pricewaterhouse Coopers, the automobile industry has changed beyond recognition in the past decade and it will continue to change over the next 10, indicating recovery may not be easy for the company.

Tata Motors, Majeed said, was unable to make the transition after Kant retired in 2009.

“Tatas needed to pick up the thread from where they had left. Unfortunately, they took a lot of time and that created a lot of uncertainty,” Majeed said.

The Tata Tiago, originally badged Zica, had to be renamed at the last minute after tropical epidemic Zika hit the headlines just ahead of its launch. Photo: HT

The Tata Tiago, originally badged Zica, had to be renamed at the last minute after tropical epidemic Zika hit the headlines just ahead of its launch. Photo: HT

The Tatas hired Carl-Peter Forster from General Motors as group chief executive in 2010 to take the reins from Kant and stabilize the company, before starting its transformation into a global firm. Forster’s sudden exit in 2011 left the firm in turmoil.

P.M. Telang, a group veteran, succeeded Forster as managing director. Telang, who had always worked with the commercial vehicles unit, could not help much. Things started looking up after Karl Slym joined as managing director from the Chinese unit of General Motors in 2012. But his sudden demise in January 2014 brought things back to square one. Those who came in with Slym started to leave, making Tata Motors once again an unstable ship.

“There may have been a flux between the time when Carl Peter-Forster left and Karl Slym came on board,” said a former Tata Motors executive, requesting anonymity.

In September 2014, the company brought in Mayank Pareek, then chief operating officer of Maruti Suzuki Ltd, to steer its passenger vehicles unit.

“If you are asking me how much have those years cost Tata Motors, let me tell you, it is a dynamite question,” said Tim Leverton, president and head, advanced and product engineering, who was hired by Tata and Kant in 2009 from Rolls Royce Motor Co.

Tim Leverton, president and head, advanced and product engineering, Tata Motors. Photo: Ramesh Pathania/Mint

Tim Leverton, president and head, advanced and product engineering, Tata Motors. Photo: Ramesh Pathania/Mint

“I came into the company as part of a process that was being led by Mr. Tata and Ravi Kant at that time. It was a process of reinvention of the company. The ambition for Tata Motors itself was massive. To be able to deliver that, they had to change the company,” Leverton said.

Tata Motors’ hopes now rest on Butschek, who helped solve problems with the Airbus A380, the world’s largest passenger aircraft, and made sure that the A350, which had run into delays, got back on track.

Referring to the fuel-efficient A380, which burns just three litres of fuel per passenger per 100km, Butschek told Roland Berger Strategy Consultants in an interview in 2011: “I would like to see the auto makers match that achievement.”

Can Tata Motors do it under Butschek?


Tata Motors has outlined four areas of immediate attention—cost, quality and productivity; improving customer experience; regular product introduction (at least two new models every year); and sprucing up the brand image.

“Honestly, there is no on-off switch with anybody. It does not happen overnight. We are working on the top line, bottom line and everything in between,” Pareek said.

With the Tiago, Tata Motors has marked the beginning of a new product cycle, which the company claims is a big departure from the past in terms of quality and design.

“We have kept our focus in terms of what we needed to do and it has taken time. Aria was the end of the deployment for the strategy from the previous decade and we had to create a new strategy and that’s what we have started to see to play out,” Leverton said.

Tiago is the first all-new car from Tata Motors in five years. Built at the company’s Sanand plant in Gujarat, it comes with a completely new engine, platform and design.

Mayank Pareek, president of passenger vehicle business unit at Tata Motors.

Mayank Pareek, president of passenger vehicle business unit at Tata Motors.

The company has intensified its focus on quality and design after constant pressure from customers and shareholders who have regularly pulled up the company on these aspects. In 2013, Tata shareholders criticized chairman Cyrus Mistry and the company for shoddy product quality.

“Quality levels and craftsmanship of our cars have improved and we are recalibrating our targets with reference to global benchmarks,” Butschek said.

On the service front, usually there are three reasons that prevent a company from addressing consumer complaints—lack of attention from the top management, lack of ability to diagnose problems and lack of spare parts. Tata Motors has started addressing all three issues.

Some of the processes have already started. Dealerships have been told to resolve all the complaints on the same day they are received. The company claims that it now resolves almost 80% of the 40 complaints it receives every day.

Brand relevance

In its studies, Tata Motors found that the young generation did not identify with the brand and did not find Tata cars engaging. This, despite the fact that the group has in its portfolio some youth brands such as Starbucks and Fastrack.

Hiring Argentine footballer Lionel Messi as its global brand ambassador was a step in this direction. “But, the pre-requisite for branding is all those three things (which prevent quick complaint redressal). If not, Messi ka baap bhi le lo… kucch nahi hoga (otherwise, even Messi’s dad won’t be able to help)” Pareek said.

To be sure, while there is some association between a brand ambassador and the set of considerations for buying a car, that doesn’t necessarily translate into sales.

The key issue is the relevance of the brand for a potential buyer, said Aveek Chattopadhyay, co-founder of Gurgaon-based brand strategy firm Expereal. “What really does the Tata badge mean to me? Does it stand for India’s best, or bring the best of the world to me? The brand’s core proposition is fuzzy.”

He believes signing Messi is a make-or-break step: “If it works for you, you have truly resurrected the brand by redefining it. If you don’t, it will be seen as yet another ego gratification.”

Fight them on beaches’

The company is planning to launch a sedan named Kite 5 based on the Zica platform, an SUV called Hexa this year, and a multi-purpose vehicle named Nexon in early 2017.

“We are getting ready to put the pedal to the metal to deliver to our commitments and expectations—and I would like to exceed those expectations,” Butschek added.

The company’s long-term “legitimate” target remains to achieve 15% market share in the Indian market, Pareek said.

“I think we surrendered too easily,” said Pareek as he implements some of the sales processes that he pioneered at Maruti Suzuki.

Maruti has a city-wise sales monitoring system, where even a 1% sales decline in any city triggers an investigation followed by necessary changes. Pareek is trying to do the same at Tata Motors.

“So, we shall fight them in trenches and we shall fight them on beaches,” Pareek said, quoting from an inspirational speech made by former British prime minister Winston Churchill just after World War II had started.

Yet, Tata Motors’ main challenge will be how the company deals with the dealers, said a former company executive, requesting anonymity.

Tata Motors has had a love-hate relationship with its dealers. While some of its top dealers such as Pune-based B.U. Bhandari were swept up by Volkswagen India as sales at Tata Motors flagged at the beginning of this decade, many deserted the company in the past 18 months, forcing the company to double dealer margin to 5%.

Some dealers who continued to stick with Tata Motors complained on the condition of anonymity about irregular payments and mismanagement of inventory and spare parts.

Mohan Himmatsingka, chairman and managing director of Patna-based Maurya Motors Ltd, a dealer of Tata Motors passenger vehicles, says he has noticed a change in approach from the company.

“Inventory build-up has stopped and they have started to realize their limitations. To sum it up, the company is much more reasonable than before,” said Himmatsingka, who is also a past president of Federation of Automobile Dealers Association.

Chasing global standards

Meanwhile, the ambition to become a global company runs deep in Tata Motors.

“We will look to establish a global footprint and it is imperative we, therefore, evaluate ourselves with respect to global benchmarks on everything we do,” Butschek said.

“This would play a significant role in the holistic transformation to make the company future-ready,” he added.

The company started building cars only in 1998, and that still makes it a very young business compared with its peers. It is still trying to come out of the mould where a young company is largely driven by specific projects.

In Tata Motors’ case, the car business was built around the development of models such as Indica, Indigo, Manza and Nano, among others. Normally, such a model is not scalable and large successful auto makers work with multi-product portfolios where everything from market research to product development fall in the same framework.

The company has re-established a process of three phases—planning, concept and development; phase of detailed engineering and design; and validation and the manufacturing launch phase. “So, how you support each of these things is very important,” Leverton said.

The company moved to the global practice of virtual engineering simulation and design in 2012 to rely less on prototypes and physical development of products.

It is a shift between a development-based approach, where a company first builds a product, find the problems in it and then tries to fix it, as opposed to a design-based approach, where targets are set.

The company designs the product to meet those targets and uses prototypes to confirm that it has met the targets.

According to Leverton, who calls it “a very different switch,” by the time you get to the end of the validation testing, you finish your engineering before you start the last stage of developing the quality of the parts.

“So, you only focus on developing the quality of the parts and you are not trying to fix engineering and developing quality of the parts,” Leverton said.

The process is helping the company put a long-term product cycle in place, which is for the next seven years. The move will allow Leverton to manage a technology cycle.

“My advanced engineering activities, we are doing it before the project starts. So, I can synchronize the tech development with the product development. So, when you are coming to integrate those technologies, you know they are going to work in the context of the product. That is one of the big problems that we faced because one thing will go wrong with the product and then everything will get delayed,” he added.

These things will help the company build a culture that exists in global automotive companies, Leverton said. Culture, he said, in a way is the collective belief of what an individual and the organization believes is the right way of doing things over a longer period of time. “As that gets embedded, that changes the culture,” Leverton said.

Meanwhile, Butscheck has asked the company’s leadership to rewrite Tata Motors’ brand statement, as against an agency that normally drafts such statements. The current brand statement is loaded with jargon and the new boss wants it to be a simple one. The company must change the way it thinks about itself, he said.

For Tata Motors, dragging itself out of the morass will take tremendous effort. If the Tiago luck stays with the company, Butschek will have reason for optimism.