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Old 7th May 2013, 14:06   #1
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Default Tata Motors to pay Rs. 2.5 lakh for selling defective car

Tata-motors is in the news for wrong reasons.

Quoting from ndtv:

"Tata Engineering and Locomotive Co Ltd (TELCO) the erstwhile avatar of Tata Motors has been directed by the apex consumer commission to pay Rs. 2.5 lakh to a customer as compensation for selling him a defective car."

More at: http://profit.ndtv.com/news/industri...-car-321906?ch
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Old 7th May 2013, 14:17   #2
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Default Re: Tata Motors to pay Rs. 2.5 lakh for selling defective car

2.5L for a 4L car appears a little less, for a car that had manufacturing defect right out of the factory. TML should have been fined heavily for knowingly putting a customer's life at risk.
I must say TML got off lightly here.
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Old 7th May 2013, 14:28   #3
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Default Re: Tata Motors to pay Rs. 2.5 lakh for selling defective car

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Originally Posted by Mudhalaipatti View Post
2.5L for a 4L car appears a little less, for a car that had manufacturing defect right out of the factory. TML should have been fined heavily for knowingly putting a customer's life at risk.
I must say TML got off lightly here.
Agreed. 2.5 Lacs is too less against a compensation for a car that costed 4 lacs and that too 13 years back! Tata Motors indeed have been let-off lightly.

Also, would like to ask the informed people here that what remedies are available to customers if he/ she gets a lemon? Is there any provision that the vehicle gets replaced once its proved to be a lemon (leaving aside petty issues & niggles)?
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Old 7th May 2013, 14:42   #4
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Default Re: Tata Motors to pay Rs. 2.5 lakh for selling defective car

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Originally Posted by Mudhalaipatti View Post
2.5L for a 4L car appears a little less, for a car that had manufacturing defect right out of the factory. TML should have been fined heavily for knowingly putting a customer's life at risk.
I must say TML got off lightly here.
TML got off lightly in with respect to the fine; but the brand loss due to gradual erosion of trust has been enormous. Such negetive publicity in media will only add fuel to fire.
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Old 7th May 2013, 14:43   #5
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Default Re: Tata Motors to pay Rs. 2.5 lakh for selling defective car

We do not have anything akin to a Lemon Law as it exists in most states in US. So in India it's an ardous task for the hapless owner.
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Old 7th May 2013, 14:51   #6
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Default Re: Tata Motors to pay Rs. 2.5 lakh for selling defective car

2.5L is too low, and 13 years too long. We do need a lemon law but who would pass it here, the politicians will not push the cause for sure. And the Auto Industry will fight such a move with all their clout.
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Old 7th May 2013, 15:48   #7
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Default Re: Tata Motors to pay Rs. 2.5 lakh for selling defective car

Unlike the US, the auto lobby in India is divided I think. And Mahindra appears to be at the receiving end of the law offlate. No regulatory compensation for a zero emission vehicle E2O, lower duty for these new quadracycles segment. 30% cess on SUVs, but less for sub 4m SUV-in-disguise. I'm digressing here.

In India, brand erosion, eating in to sales is only marginal. If that were to be true, Skoda would have packed their bags, a number of years ago. Public memory is short lived you see.
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Old 7th May 2013, 15:54   #8
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Default Re: Tata Motors to pay Rs. 2.5 lakh for selling defective car

Tata motors won this case.
Think of it this way.
Lets say Tata motors can save 30,000/car by skimping on quality.
Now, somebody does an analysis that one in 50 customer of Faulty cars will go to court(Actually 1/100 goes)
If all of those who go to court are offered cost of car (even 4L) as compensation, Tata will lose

4L/50 cars
If tata fixes problem, than its a 15 lakh loss.

There is a historical name for this analysis. Its called "Pinto Analysis".

Ford figured that lawsuits will be cheaper than fixing the Ford Pinto. However Ford was in the USA, and got hit heavily by damages.

However, Tata can do Indica, Nano, etc., analysis, and as duty to the shareholders of the company Tata motors, they should pay the fine rather than fix the problem, as fixing the problem will erode profit margins.

Before you start on "Brand perception and loss of sales due to negative publicity), please remember, the next quarter is important. If you can save XX % for the next quarter, your short term goal is met. As for long term goal..... What do you think we are, the MET department that we will give long term monsoon forecast
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Old 7th May 2013, 16:09   #9
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Default Re: Tata Motors to pay Rs. 2.5 lakh for selling defective car

Quote:
Originally Posted by tsk1979 View Post
Tata motors won this case.

There is a historical name for this analysis. Its called "Pinto Analysis".
That's an interesting insight; looking from another angle. This is why companies should be fined heavily. More so because its a company, operating for profit motive by selling vehicles to people. A 2.5 lac rupee fine is just too meager sum for a company as big as Tata Motors, or for even an average size company, for that matter.

Also, the fine should have included the cost of the car adjusted to inflation, interest at prevailing rate for all these years the money was blocked, legal expenses that the person incurred, harassment charges and some penalty on the company for selling sub-standard products. And how come these cars pass the quality control? Or QC is just another hogwash?

All this said & done, the company should also do another analysis: a 'Pinto Benefit vs Brand Image Lost analysis'. Do they really know that how much their brands get a beating due to these acts?

Last edited by saket77 : 7th May 2013 at 16:16.
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Old 7th May 2013, 16:16   #10
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Default Re: Tata Motors to pay Rs. 2.5 lakh for selling defective car

Quote:
Originally Posted by tsk1979 View Post
Before you start on "Brand perception and loss of sales due to negative publicity), please remember, the next quarter is important. If you can save XX % for the next quarter, your short term goal is met. As for long term goal..... What do you think we are, the MET department that we will give long term monsoon forecast
Branding/reliability is important. That is why people pay a premium for samsung/apple although micromax etc are available at a fraction of the price.

The next quater is a factor of previous quater; and brand loyalty of previous decades as well.

To quote from team-bhp reviews of tata-cars:

What you won’t:
.
.
• Niggling issues & problems. Tata's after-sales service remains a gamble


Thats brand perception!
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Old 7th May 2013, 16:43   #11
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Unhappy Re: Tata Motors to pay Rs. 2.5 lakh for selling defective car

IMO what the Customer gained was not in the monetary benefits but bringing Tata Motors to its knees and forcing Tata motors to not take the customer complaints lightly. But its very unfortunate that the customer had to take the car to the workshop 36 times in a single year. Any guesses which car this might be?
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Old 7th May 2013, 17:01   #12
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Default Re: Tata Motors to pay Rs. 2.5 lakh for selling defective car

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Originally Posted by ghodlur View Post
Any guesses which car this might be?
Indica. The article mentions it.
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Old 7th May 2013, 17:08   #13
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Default Re: Tata Motors to pay Rs. 2.5 lakh for selling defective car

Quote:
Originally Posted by anurag.somani View Post
Branding/reliability is important.
Of course its very important. That was not the point I made. The point I was making is that many organizations now work quarter to quarter. Lets maximize this quarter, who knows what after 6 months or 1 year.
Very few companies actually look at long term strategy, esp in India.
This attitude trickles down to all management levels, with the production guy trying to minimize his cost. He just has an excel sheet where he will present to the management that he saved 10% by replacing X with Y. Thats it. Nobody looks at the big picture. For example, will taking a 5% hit in profits give better results 3-4 years down the line?
Same happens at service center. The Service advisor will argue for warranty replacement etc., or charge extra to customer to show he got X % extra to the company or dealer. However, there is nobody looking whether X % extra now will result in 10X lower 2 years down the line when the reputation of dealer as dishonest spreads.
As a result of this article, and by efforts of the aggrieved party 10 more people would not buy Tata, and brand value takes a hit. If Tata had replaced the vehicle 1-2 years down the line, from a long term POV it would have made sense.
But with appraisals looking at "how much did you save this minute", and short term goals, and every division working like a wheel turning in the opposite direction, you have the current fiasco that is Tata.
Their Nano sales are in the pits, few buy the Vista, an inferior vehicle like Scorpio far outsells the Storme, and a much touted multi million dollar project like the Aria is an epic fail.
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Old 8th May 2013, 12:36   #14
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Default Re: Tata Motors to pay Rs. 2.5 lakh for selling defective car

Quote:
Originally Posted by tsk1979 View Post
Tata motors won this case.

Lawsuit: 4L/50 cars vs If tata fixes problem, than its a 15 lakh loss.

There is a historical name for this analysis. Its called "Pinto Analysis".

Ford figured that lawsuits will be cheaper than fixing the Ford Pinto. However Ford was in the USA, and got hit heavily by damages.
This is EXTREMELY relevant. I remember that long time back in Delhi - the bus fares were in the region of Rs 5. And ticket less traveling fine was Rs 20. Most people used to travel without ticket. Because say in a month you get caught 5 times (worst case scenario) you lose Rs 100.

You pay for ticket every day, you spend Rs 5 everyday = Rs 100 (for 20 working days per month).

Hence, all fines and compensations should take into account the "probability of getting caught" angle into account (like the above case, DTC promptly revised the ticket less traveling fine to Rs 100 or 200, which was still pretty low)

***

Seriously there has to be a class action suit against all vehicle manufacturers against the malpractices (I see an active thread about Skoda After Sales not honoring the warranty). I don't buy the argument that dealers are crooks and manufacturers are saints.
If you are a saint - let me see you bag a dealership! The manufacturers (or you may say their machinery) actively support crookedness ...



Quote:
Originally Posted by tsk1979 View Post
many organizations now work quarter to quarter. Lets maximize this quarter, who knows what after 6 months or 1 year.

But with appraisals looking at "how much did you save this minute", and short term goals, and every division working like a wheel turning in the opposite direction, you have the current fiasco that is Tata.
You need to add that ultimately the people working from highest management to the lowest worker are all looking to polish their resumes. When they are going to hop skip and jump in a year or so, will the long term results today actually make an impact on their resumes long after they left that organization?

Last edited by alpha1 : 8th May 2013 at 12:45.
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Old 8th May 2013, 12:58   #15
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Default Re: Tata Motors to pay Rs. 2.5 lakh for selling defective car

Totally agree with TSK

TATA actually won the case. The penalty was too low for the complainant to also feel satisfied and TATA definitely saved money in the process.

The other thing also as touched upon by TSK is that the person taking the decision at each level is not looking at TATA after 10 years or even 5 years. He is looking at his quarterly or yearly incentive package and performance appraisal and he just wants to get that maximized. Even the -ve coverage will affect the entire company and not an individual. So while we may wonder how can TATA or any manufacturer not bother about it's brand image, we need to realize it is not a company as a whole that is acting but various individuals all bothered about their position and package in the short term.
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