India’s largest trucks and bus-maker, Tata Motors, has said the company’s leadership in the segment could be ?challenged? and it will develop new vehicles to tackle rising competition from multinational rivals such as Mercedes Benz, Volvo and Navistar. ?Tata Motors? predominance in the commercial vehicles sector will be challenged by international brands like Mercedes Benz, Volvo and Navistar,? said Ratan Tata, the company’s chairman, in a letter to shareholders.
?The company is developing a new range of fuel-efficient commercial vehicles to tackle the competition head on.?
Tata Motors? market share in the commercial vehicles segment has steadily slipped, and in 2011-12, its share was 59.4% compared to 61.2% a year ago. Its sales growth was also slower than the industry?s. While the country?s commercial vehicle sales in 2011-12 grew at 19.2% compared to the previous year, Tata Motors? commercial vehicle sales grew only at 15.7%.
The company?s consolidated net profit for the 2011-12 fiscal grew 45.8% to R13,516.5 crore, primarily driven by the performance of its UK arm Jaguar Land Rover. On a standalone basis, the company?s net profit for the fiscal fell 31.4% to R1,242.2 crore. Competition from Tata Motors is emerging from German-major Daimler?s BharatBenz range of trucks, which plans to launch 20 models by the middle of CY13 and have invested R4,400 crore to set up a manufacturing capacity of 36,000 units a year. The capacity will be ramped up to 72,000 in the next phase of expansion.
Mahindra Navistar has managed to eke out a market share of 3.6% after two years of operations and is planning to ramp up capacity to get a greater share of pie. ?Tata Motors will need a significant upgrade in products to stay ahead of the competition in the next 4-5 years,? said a consultant with a foreign management consultancy firm. ?Though its sales and service network still gives it an edge and it will have leadership for the next couple of years, it needs to invest now and start planning for what will happen after five years.?
The company has earmarked an investment of R1,500-2,000 crore for new product development in the commercial vehicle segment, and plans to launch 50 new variants across its commercial vehicle range over the next two financial years. ?We will invest R1,500-2,000 crore for our new line of products,? Ravi Pisharody, executive director ? commercial vehicles business unit ?Tata Motors, had said last month. In his letter in the company’s annual report for the fiscal 2011-12, chairman Tata, who steps down in December to pass on the mantle to Cyrus Mistry, also urged the passenger vehicle division to step up and address the needs of the Indian market more efficiently to gain back the market share it used to enjoy in the past.
?In passenger cars, Tata Motors will face even more competition from the many automotive brands in the country,? said Tata. ?The company will need to address the marketplace more effectively with its existing and future products in order to regain the level of market share that it earlier enjoyed.?
In the 2011-12 fiscal, the company?s sales in the mid-size segment and the executive segment, where it operates with the Indica and the Indigo, fell 48.5% and 43.8%, respectively. ?The company?s sales in the mid-size segments suffered as competition severely intensified with multiple new launches from other industry players in this segment,? the annual report states.
Overall, the company?s market share in passenger vehicles remained flat at 13.1%. ?They have lost so much traction in the passenger vehicles market that, honestly, it has become a case of going back to the drawing board for Tata Motors,? said the consultant quoted above. ?Their passenger vehicle division needs a reboot and they need to invest in R&D and marketing to regain their lost image.?
Tata Motors? have said in their annual report that the company will invest in R&D to remain a premium passenger vehicles maker.
