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Tata Motors is waiting for the CV market to look up

The domestic commercial vehicle segment is going through tough times. It has seen slowdown in sales for the last straight eight quarters

The domestic commercial vehicle segment is going through tough times. It has seen slowdown in sales for the last straight eight quarters and 40% of the capacity is lying unutilised.

R Ramakrishnan, senior VP, commercial vehicles business unit of Tata Motors, told FE?s Rachit Vats how the company is managing inventories as it waits for the market to look up.

Could you give a guidance on current demand levels in the truck industry?

This is one of the longest slowdown in the commercial vehicle (CV) industry. It?s already two years and there are no signs of recovery. The overall consumption has come down significantly over the last eight quarters and in our assessment, the unutilised capacity is almost 40% of the total trucking capacity. Companies are renegotiating contracts with truckers ? either asking them to lower rates or appointing new contractors and only such customers are buying at this juncture, otherwise there is no need for newer trucks. Every player is trying to meet the deals that are available in the market, which has led to discounting. Excess capacity and inventory are forcing discounts to go up and reach unmanageable levels.

What is the current inventory level at Tata Motors?

The inventory is very tight. In the heavy trucks, the dealer inventory is about a month and our inventory is between 10-14 days. We have been very careful with calibrating the production based on retail stocks.

In such times, how do you do product planning?

We are constantly developing new products to address the key requirements of the transportation segment. Even this year, during the slowdown, we have about 70 products slated to be launched. We have launched 40 and the balance will come soon. New product development continues at the fore because product development cycles are different in the CV industry. Even if there is a slowdown, we know the market will turnaround. Our focus is on total cost of operations, which is primarily on fuel, tyre and repair & maintenance. The LCV segment is also witnessing a slowdown and has declined 15% year-on-year to 359,835 units during the April-January period.

Lighter transportation is for the last mile distribution. The biggest, truck segment, gets hit in the beginning of a slowdown as the manufacturing output comes down. Smaller trucks on last mile see it much later. After eight quarters of slowdown it?s only last year that agricultural activity has improved, the light vehicles, too, got affected. Because the agricultural output is better, there is an optimism that this will result in some amount of vehicle purchase.

Few truck makers have been talking about more mining tenders getting passed….

Iron mining has sporadically started in Karnataka and Orissa but it?s still very small. Even if the mining activity does get started, companies will have to find customers. It will take time to recover.

Are you looking at expanding dealership numbers?

We have about 300 dealers and we are not extending dealer network, unless absolutely necessary. Otherwise, we are taking steps to ensure the incumbent dealer is able to profitably run the operations. That?s being done in various ways ? margins, incentives, manpower selection and inventory management. Profit levels are not the same as they used to be two years ago, still we are taking steps to ensure dealers remain profitable. Typical dealer margins are in the 4-4.5% range.

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First published on: 20-02-2014 at 05:15 IST
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