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Old 18th December 2012, 09:02   #1
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Red face Tata Motors on an austerity drive. Production cut too

Tata Motors is currently going through a rough patch with the MD Karl Slym asking for an austerity drive. He has asked the departments to cut down on unneccessary expendityure which inlucde travelling, stay. He has gone to extent of asking his employees to travel by train, take up night journeys, No face to face meetings, curtail foreign travels etc to save costs.

Production at Pune plant has been halved. Most of the manufacturing plants are now 5 days operations as against 7 days earlier. Lucknow plant now operates 4 days a week. Tata Motors is facing a severe cash crunch which is definitely going to affect the future launches. Commercial vehicle division seems to be the most hit.

Will Tata Motors come out of the state it is presently in.

http://economictimes.indiatimes.com/...w/17658494.cms

Last edited by ghodlur : 18th December 2012 at 09:23.
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Old 18th December 2012, 09:12   #2
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Default re: Tata Motors on an austerity drive. Production cut too

Even the Fiat Plant where Vista and Manza is being manufactured is working on one shift and 6 days a week.

The slump in the market is easily visible and has got to the production lines as well.

Nothing wrong in controlling costs and Karl Slym is right in cutting down travel expenditure.
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Old 18th December 2012, 09:46   #3
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Default re: Tata Motors on an austerity drive. Production cut too

Yes the economy is going through a slump, most evident by weak Diwali sales, but Tata has been hit way more than other big manufacturers. Maruti would not need to institute such measures. I agree there is nothing wrong in cost cutting and austerity, but you need to balance cost cutting vs improving sales. Face to face meetings may be expensive in this age of technology but it still sells more.

Tata are in the dumps because sales are way down and look to be dipping monthly. They need to fix their image in the market or they will need to use other Tata divisions to cross subsidize their vehicles divisions
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Old 18th December 2012, 10:15   #4
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Default re: Tata Motors on an austerity drive. Production cut too

There are many reasons for Tata motors downfall.

The most important. All their cars are the same. Same platform. The indica and its sisters. People are bored with its looks.

The indica/go are mostly used in cab segment. which TM encourages. So people who want a personal car, prefer to ignore TM.

The next most important reason is Quality in the product. TM products are filled to brim with features, but only a few work without issues in the long run.

The reliability of the car is not great. I agree that there are many satisfied customers of indica/indigo. But there are an equal number of people who are not at all satisfied with the product.

Quality of service. Oops. i dont want to talk about it. Everyone knows.

With increasing number of car brands in india, everyone is getting their own pie. but there must be someone who has to loose. A significant looser of his share would be TM because of above mentioned salient features of TM.

Other reason being. Tata has no good diesel engine. Yes they have many 407 like engines but no good smaller engines. they buy significant share of engines from Fiat or other vendors of TDI. This increases the product cost, however they sell the product at a lesser price. This implies margins are low when compared to other makes like Maruti. A significant downfall in sales figures would impact their balance sheets like hell.

A significant increase in disposable income of common man. Now he wants hassle free product. So no cab and no Tata car for him.

Last edited by gemi_kk : 18th December 2012 at 10:19.
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Old 18th December 2012, 10:46   #5
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Default re: Tata Motors on an austerity drive. Production cut too

Nothing wrong in cutting costs, if it is meant to benefit the company as a whole. And there is a good reason too. TAMO standalone sales just doesn't cut the cake. The much anticipated Storme too didn't exactly set the charts on fire. Fair move.

Given that JLR is raking in the moolah, although their margins have slipped, TAMO should be aiming to achieve something close. Yes, their products are different, markets are different but learning a thing or two would do more good for TAMO.

TAMO may be down but certainly not out.
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Old 18th December 2012, 10:53   #6
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Default re: Tata Motors on an austerity drive. Production cut too

I have said this numerous times, Tata has to let go off its "Indica" image first. It needs to capture the imagination of the B+ hatchback segment customers. Products have evolved, but the attitude of not letting go of older platforms for short term gains have permanently sealed Tata's image as a "taxi" brand. Aria, Vista, Manza are decent VFM products, its the image of the brand that is hurting them the most.
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Old 18th December 2012, 11:11   #7
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Default re: Tata Motors on an austerity drive. Production cut too

They should retire the names Indica and Indigo and exit the segments where they are not performing well. That should save them a lot of money. There is not really any new segment thats left in which Tata can lead. Looks like collaborating with Fiat was a bad omen ?
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Old 18th December 2012, 11:42   #8
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Default Re: Tata Motors on an austerity drive. Production cut too

I'm just hoping that this "austerity" drive doesn't put further cost pressure on their suppliers. Tata's quality of parts is already P-O-O-R. I've seen the quality of rubber & pipes Tata uses. Well, they are born to fail. Cost appears to be the only consideration, not durability.

The Indian customer doesn't want cheap anymore. He wants value-for-money. And there's a good chunk of the market willing to pay premium too! But cheap + poor quality just doesn't make the cut anymore.

Perhaps, all the money saved at the offices & management could be spent on better quality parts. At the end of the day, there is only one thing that counts for an auto manufacturer : The actual CAR they make.

Last edited by GTO : 18th December 2012 at 12:42.
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Old 18th December 2012, 11:58   #9
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Default Re: Tata Motors on an austerity drive. Production cut too

Quote:
Originally Posted by srishiva View Post
Looks like collaborating with Fiat was a bad omen ?
Absolutely. Tata should have continued using their own DI engines instead of the fine 1.3 MJD from Fiat.

Jokes apart, the Manza and the Vista are absolute VFM products in their respective segments. Service aside (depends on which side of the bed you get out of), I cannot think of any major reason for not buying the Manza or the Vista.

Austerity, not necessarily means that a company is headed for the bin. Maybe they are just cutting out the fat to build a leaner, meaner organization. With Mr. Tata on his way out, maybe this is Cyrus Mistry' way of running the organization.
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Old 18th December 2012, 12:08   #10
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Default Re: Tata Motors on an austerity drive. Production cut too

Quote:
Originally Posted by gemi_kk View Post
With increasing number of car brands in india, everyone is getting their own pie. but there must be someone who has to loose. A significant looser of his share would be TM because of above mentioned salient features of TM.

Other reason being. Tata has no good diesel engine. Yes they have many 407 like engines but no good smaller engines. they buy significant share of engines from Fiat or other vendors of TDI. This increases the product cost, however they sell the product at a lesser price. This implies margins are low when compared to other makes like Maruti. A significant downfall in sales figures would impact their balance sheets like hell.
Sorry to nitpick, but wouldn't the same logic of engine cost also apply to Maruti. All their diesel engines are fiat ones. Yes it helps that they have a large chunk of petrol sales from the alto, but diesel engine story should be the same. Tata should have been doing enough volumes with the nano to compete against the alto. Instead, they aren't even in the top 10 with nano sales.

Also, with the market share issue, I agree with the logic provided there is a static market. If the market is growing, then percentage sales Mott come down but total number of vehicles sold would increase.
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Old 18th December 2012, 12:36   #11
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Default Re: Tata Motors on an austerity drive. Production cut too

Quote:
Originally Posted by srishiva View Post
Looks like collaborating with Fiat was a bad omen ?
How would FIAT be responsible or the bad omen rubbing off on TATA when TATA itself is hell bent on diluting its own brand due to poor quality. Atleast the association with FIAT has ensured the Engine related warranties have come down.

TATA simply has to rejig the whole model line up and get rid of Indica and Indigo brands. Secondly, having 100 variants does not either in the assembly line and the customers who are buying will go nuts with so many options and decide none of these.

Quote:
Originally Posted by GTO View Post
I'm just hoping that this "austerity" drive doesn't put further cost pressure on their suppliers. Tata's quality of parts is already P-O-O-R. I've seen the quality of rubber & pipes Tata uses. Well, they are born to fail. Cost appears to be the only consideration, not durability.

The Indian customer doesn't want cheap anymore. He wants value-for-money. And there's a good chunk of the market willing to pay premium too! But cheap + poor quality just doesn't make the cut anymore.
Absolutely agree with you on this. India has moved on from the low cost to value proposition. The very reason for Nano's lack lusture sales is the low cost strategy and branding.

Cutting down on features to give a better a quality product is a better idea any day than giving loads of features at low cost out which gives niggles time and again.

Else TATA keep doing business this way and let the commercial vehicles division fully subsidize the passenger car business
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Old 18th December 2012, 12:49   #12
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Default Re: Tata Motors on an austerity drive. Production cut too

They really need to wake up and ask themselves Do we have what the market wants. Until they get an answer to this it will be tough for TM.

Market is down but still companies with clear understanding and good products are not hit hard. It is not like auto co's have written off the Indian market, this market is still one of the most lucrative and upcoming one in the world.

Tata Motors has a lot of strengths which sadly they are not using to their advantage.

Tata has a very strong Dealer/Service network but without good products, this is just not being used.
They have one of the best supplier links and access to various allied industries, being TATA in some of these industries they have their own sister concerns as well.

Their main disadvantage is that they have become complacent, in new launches, in quality, in After Sales support the list probably goes on.

I was just reading a few days ago how serious companies like Renault-Nissan, Toyota etc are for their Indian operations, they are so dedicated in their cause to succeed in India that they are not leaving any stone unturned. The announcement of low cost mass movers, more dealers, better quality and the list just goes on. I really think imagine if any of the above companies had access to Tata's strengths, MAN that would be one potent recipe.
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Old 18th December 2012, 12:55   #13
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Default Re: Tata Motors on an austerity drive. Production cut too

I recall one of the recent press interviews with Ratan Tata, where he lamented that there were not enough people in Tata Motors who built cars with passion. Cars are very personal objects, these are not something you churn out by the thousands off an assembly line. Look at any brand or model which has succeeded or is aspirational to many and you will find passion which went into putting it together and that made a difference . I have been on the assembly line and observed the shoddy manner in which the door beedings , roof linings etc are fitted and it shows...
When you churn out cars off the assembly line as TAMO does these are machines for transport and they will be used largely in the taxi segment, where the idea is to generate revenue not enjoy your drive.
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Old 18th December 2012, 12:56   #14
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Default Re: Tata Motors on an austerity drive. Production cut too

Rebranding should also be executed by Tata, alongwith this cost-cutting exercise. They have to realize this is not a typical chicken-egg situation they find themselves in, fortunately.

Lot has been said about their current predicament, but all of that can be summed up in one statement - give the modern Indian customer the personalized car ownership experience he requires. Stop calling cars aimed at the personal segment as Indica and Sumo and start giving cars that are insulated from the taxi segment to a large extent.
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Old 18th December 2012, 12:57   #15
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Default Re: Tata Motors on an austerity drive. Production cut too

Do not worry. With the culture that the Tata group has there is also a lot of value attached to emotions and other non tangibles. And no Tata exec worth his salt will talk of pulling the plug on a few things which you may see as obvious as daylight. Remember, Indica was born out of RT's conviction that with rockets marching to moon India should definitely be able to make decent cars. And also, the car can be priced like a M800 and yet have the space of an Amby. Now there is a lot of EQ attached to the Indica brand. SUMO was a brand that paid homage to the immense contributions of Sumant Moolgaonkar. With the change of guard lot of these may be given a heave ho. They may just be waiting for The Time.

Last edited by Zappo : 18th December 2012 at 13:02.
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