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Old 28th May 2015, 12:13   #1
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Default Tata Motors' profit plunges, no dividends this year

Tata Motors has reported a 56.2% decline in net profit in the first quarter of 2015. While analysts had estimated over Rs. 4,060 crores, the company reported a net profit of merely Rs. 1,717 crores consolidated net profit. Foreign exchange fluctuations itself resulted in a loss of Rs. 2,355 crores.

It is a known fact that JLR accounts for nearly 80% of Tata's profits. China contributes to nearly one-fifth of JLR's total revenue. The slowdown in China's luxury car market seems to have a major impacted on the balance sheet numbers. While a year-ago the quarterly increase was 36%, the recent earnings of the group fell by 20% to 23,526 vehicles in the market. Competitors like Mercedes-Benz and Audi in China seem to have resorted to reduction in prices, however, JLR hasn't adopted the same. Industry exports claim that the company benefited during the luxury car market boom in China, with is premium pricing strategy, however, it seems to be hurting now.

Tata Motors' Indian operations recorded a loss of Rs. 1,164 crores, compared to Rs. 817 crores last year, due to high depreciation and amortization costs.

The group said that it will not pay any dividend this year. This is the first time since 2002, that the company has held back dividends.

JLR is now betting on the Jaguar XE and new XF sedans to drive volumes. On the other hand, Tata Motors continues to bank on its commercial vehicles and new passenger vehicles to drive volumes.

Sources: Reuters, Economic Times, Livemint
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Old 28th May 2015, 12:55   #2
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Default re: Tata Motors' profit plunges, no dividends this year

I think Tata needs to do the following:
a. Launch AMT Bolt (petrol & diesel) and reduce its price
b. Launch AMT Zest petrol
c. Re-position Xenon 3.0L luxury as BS4 (private use)
d. Launch Safari automatic
e. Drop prices of Safari Dicor
f. Provide maintenance package for 3 years on all vehicles (like one is for Sumo Gold which covers consumables as well)
g. Launch Raptor based compact UV as soon as possible
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Old 28th May 2015, 13:27   #3
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Default re: Tata Motors' profit plunges, no dividends this year

Zest is an awesome car I was seriously considering it a month back but the arrogance of the Marketing people made me remove it from my list.

Tata should revamp their marketing team. They treat everyone like a taxi buyer (my experience based on interaction with 2 Tata dealerships).
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Old 28th May 2015, 15:47   #4
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Default Re: Tata Motors' profit plunges, no dividends this year

Quote:
Originally Posted by purohitanuj View Post
I think Tata needs to do the following:
a. Launch AMT Bolt (petrol & diesel) and reduce its price
b. Launch AMT Zest petrol
c. Re-position Xenon 3.0L luxury as BS4 (private use)
d. Launch Safari automatic
e. Drop prices of Safari Dicor
f. Provide maintenance package for 3 years on all vehicles (like one is for Sumo Gold which covers consumables as well)
g. Launch Raptor based compact UV as soon as possible
Quote:
Originally Posted by vinukm View Post
Zest is an awesome car I was seriously considering it a month back but the arrogance of the Marketing people made me remove it from my list.

Tata should revamp their marketing team. They treat everyone like a taxi buyer (my experience based on interaction with 2 Tata dealerships).
The drop in profit has little to do with local models. In fact for local operations (non-commercial vehicles) they had already reached rock bottom and the only way is up.

The drop has more to do with JLR and global slowdown in the industry.
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Old 28th May 2015, 16:37   #5
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Default Re: Tata Motors' profit plunges, no dividends this year

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Originally Posted by vinukm View Post
the arrogance of the Marketing people.

They treat everyone like a taxi buyer (my experience based on interaction with 2 Tata dealerships).
Spot on. I am in process of buying a NANO. Combined with the car's known reliability issues, it is the dealers' bad attitude that I have still not been able to finalize anything. It is like no one wants to take the ownership and as a customer I feel like I am on my own. TATA seriously needs to pull up its dealers.
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Old 28th May 2015, 18:02   #6
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Default Re: Tata Motors' profit plunges, no dividends this year

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Originally Posted by chncar View Post
The drop in profit has little to do with local models. In fact for local operations (non-commercial vehicles) they had already reached rock bottom and the only way is up.

The drop has more to do with JLR and global slowdown in the industry.
EXACTLY!!

Folk keep thinking Tata's fortunes are hinged on their passenger car division but it couldn't be farther from the truth!!

Tata Motors annual profits are more than entire Suzuki's auto business (Maruti, Cars, bikes etc..etc..), M&M (UVs, tractors, trucks, bikes etc..stc..) and Ashok Leyland all three put together! Its YoY profit has actually grown for the quarter ending in March

The drop in quarterly profits are mainly down to a slowdown in Chinese luxury car sales primarily due to the Communist party's clamp down on government spending, investigations into practices by foreign car firms affecting margins and anti graft investigations. The sales slow down have affected the german 3 as well.

The quarter was also affected by rampant investments in its new Chinese plant in Changshu.

Also the biggest impact came from foreign exchange losses

Quote:
Explaining the steep decline in profits, Vijay Somaiya, VP and head, treasury and investor relations at Tata Motors, said, "We had to incur a translation loss of £90 million on account of £2.5-billion foreign currency loans and £150 million on forward hedges. Onethird of our foreign currency loans are dollar denominated hence, slide in currency led to translation losses." Somaiya explained that the automaker keeps five year forward hedges, out of which in the first year, JLR covers about 75-80%.
Source:
http://economictimes.indiatimes.com/...campaign=cppst

Folks keep thinking Tata motors is doomed due to the decline in the sales of Indicas, Nanos and Sumos. Tata Motors makes its money from JLR and then the Commercial vehicles division. Unlike the passenger car business the other two are blessed with hefty margins. At close to 20% JLR have the best profit margins in the auto industry by far.
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Old 29th May 2015, 12:20   #7
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Default Re: Tata Motors' profit plunges, no dividends this year

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Originally Posted by shortbread View Post
Folks keep thinking Tata motors is doomed due to the decline in the sales of Indicas, Nanos and Sumos. Tata Motors makes its money from JLR and then the Commercial vehicles division.
True. But the fact is that the Indian passenger car division - its most visible business to the public - is a huge drain on Tata Motors (as a whole). Forget making money, it has a long history of losses.

Chncar summed it up perfectly:
Quote:
Originally Posted by chncar View Post
In fact for local operations (non-commercial vehicles) they had already reached rock bottom and the only way is up.
I just wonder how long Tata will persist with the passenger car division. It's one failure / sob story after another. If Tata can't turn it around in 5 years tops, they should just close it down and instead, spend their time, money & managerial talent on commercial vehicles & Jaguar-Land Rover. As you rightly said, these are the only businesses making them money.

The competition in the sub-10 lakh segment is too fierce for someone with a weak position like Tata. To succeed, you either have to be an all-rounder (e.g. Maruti) or a specialist with a USP. Tata has damaged its own brand and there's no compelling reason to choose its product over others. At one time, the Indica / Indigo USP was space + diesel (no one else offered it). Not the case today.

You could buy a Hyundai for quality, Maruti for the brand & trust, VW for the build & performance...Tata simply doesn't have a USP anymore. Club that with the poor brand value and it's easy to see why the Bolt & Zest are sliding.

Mahindra is in a stronger position because it found & successfully established its place among utility vehicles. Tata had that too in the nineties when the Sumo was the best selling MUV in India. Look how they botched up their UV line-up in the last 2 decades.

Last edited by GTO : 29th May 2015 at 12:26.
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Old 29th May 2015, 12:48   #8
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Default Re: Tata Motors' profit plunges, no dividends this year

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Originally Posted by GTO View Post
True. But the fact is that the Indian passenger car division - its most visible business to the public - is a huge drain on Tata Motors (as a whole). Forget making money, it has a long history of losses.

Chncar summed it up perfectly:


I just wonder how long Tata will persist with the passenger car division. It's one failure / sob story after another. If Tata can't turn it around in 5 years tops, they should just close it down and instead, spend their time, money & managerial talent on commercial vehicles & Jaguar-Land Rover. As you rightly said, these are the only businesses making them money.
I agree, the struggles of Tata's passenger car range is what is most visible to every Indian.

I think Tata needs to think out of the box and perhaps look at merging or acquiring a majority stake in another mainstream car maker. Mazda, Peugeot-Citroen, Proton, Mitsubishi etc... It gives Tata instant access to newer models, gives these brands local manufacturing facilities and distribution network in an instant. Ideally should be a win win situation.

This will put the existing manufacturing facilities to good use and will save Tata time and money required for rebuilding the passenger car brand. On the other hand if the recent efforts by Tata in improving its line up does bear fruit then Tata can continue in the segment or if not focus on the new brand.
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Old 29th May 2015, 16:42   #9
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Default Re: Tata Motors' profit plunges, no dividends this year

The culture of a company reflects on its competitiveness!

Tata motors - Be shrewd and stop being sentimental. With most global players having set shops in India, it is practically impossible to sell your cars(that are way below par in most areas). Dissolve your organization in passenger cars segment and focus (with proper foundation that encompasses quality, reliability and customer focus) on CV segments which has less or no competition. Who knows what holds in future, if you develop a strong company culture, you can always come back to selling cars.

So for the moment, as they say in Casino - Cut your loses and quit the game!

P.S: I'm not going to talk about your After Sale Services, I know you wouldn't like to talk about it either!
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Old 29th May 2015, 17:11   #10
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So for the moment, as they say in Casino - Cut your loses and quit the game!
+1. At least FIAT is making money by selling engines.

A hypothetical question: if Tata passenger cars (sans the UV) is shutting down, who will stand to gain the most?
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Old 29th May 2015, 17:31   #11
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if Tata passenger cars (sans the UV) is shutting down, who will stand to gain the most?
Naive Indian consumers - who associate Tata with "VFM" and "Mere Bharath", and end up snoring in Tata A.S.S waiting for their cars to get repaired.
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Old 29th May 2015, 18:20   #12
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Default Re: Tata Motors' profit plunges, no dividends this year

I know I am out of my league here, but if I were leading Tata Motors, I would retain the passenger car division, but at this very second shut off the assembly line for Sumo, Grande, Safari, Indica &Co, Vista, Bolt, Manza, Winger and Venture.

I'll retain Xest & Storme (only to have a SUV placeholder but to be replaced by a totally new SUV asap) and then build up the portfolio from there.

Aim at building one market disrupting car asap - preferrably a SUV and use that as a launch platform for a brand name change exercise and from that point onwards say tata to TATA.

PS: For all my viewpoints, I respect the fact that I just can't imagine the constraints and the forces among which decisions are being and will be made in the company.
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Old 29th May 2015, 18:35   #13
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Default Re: Tata Motors' profit plunges, no dividends this year

A complete overhaul of Marketing strategy is what TML needs desperately, at least to spruce up sales in the local markets. I feel one of their priorities should be Advertising. I rarely see TATA advertise their new launches (apart from Zest/Bolt).
  • They have a lot of great videos emphasizing on Storme's USP and abilities on Youtube. Why not bring it to the masses via better advertisement strategies?!
  • Again, Back when Storme was launched, the Terrapod activities made an impression and went a long way to create customer awareness.
  • I don't suppose ARIA was advertised at all! I know a lot of Indian customers are not aware of the fact that ARIA received a facelift a year back, and that the prices were slashed. Just the other day, an ARIA overtook my car and my uncle was like - "Which car is this? It looks great!". When I informed him about the specs and price, he was shocked. He bought an Innova 6 months back, if he had known, maybe he would have bought ARIA insted.
  • The new Safari Storme was launched silently (or not, no one knows!!). Why not use this as an opportunity to reach out to the masses?
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Old 29th May 2015, 19:35   #14
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Default Re: Tata Motors' profit plunges, no dividends this year

Quote:
Originally Posted by CliffHanger View Post
Tata motors - Be shrewd and stop being sentimental. With most global players having set shops in India, it is practically impossible to sell your cars(that are way below par in most areas). Dissolve your organization in passenger cars segment and focus (with proper foundation that encompasses quality, reliability and customer focus) on CV
I do not agree with the point that Tata passenger cars should shud shop in India. I agree that they have not got a single hit in the last so many years. But the problem is not actually with the cars or the buyers. The problem is in marketing, the problem is also in designing. They need to fire their designing team and marketing team and recruit some fresh brains.

When Tata knows that taxi image is one of the major reasons why their cars do not sell well, they come up with Zest and Bolt what is more or less a Vista. Even though it is true only with exterior looks, primary opinion is formed by exterior looks. Only if that impresses a prospective buyer, he will go check the interiors and features. Tata needs to come up with better designs and not better cars - their cars have always been pretty good and improving with every iteration. Giving up is not an option - they have to come out fresh.

Quote:
Originally Posted by ramzsys View Post
A hypothetical question: if Tata passenger cars (sans the UV) is shutting down, who will stand to gain the most?
No one. None of their cars are selling so much that their withdrawal will boost someone else. Fiat is bound to lose a bit in their engine sale - not much though, just some 4-5k maximum per month.

Quote:
Originally Posted by nerd1200 View Post
A complete overhaul of Marketing strategy is what TML needs desperately, at least to spruce up sales in the local markets. I feel one of their priorities should be Advertising. I rarely see TATA advertise their new launches (apart from Zest/Bolt).
Exactly. I totally agree with this. Very few people in Tier 2 and 3 cities know about a Zest or Bolt, but everyone knows about the clutch-less Celerio. It is not only about a few ads, it is the impact you create with your marketing strategy - that is what is missing in Tata's strategy.

Quote:
Originally Posted by nerd1200 View Post
The new Safari Storme was launched silently (or not, no one knows!!). Why not use this as an opportunity to reach out to the masses?
Oh well, I guess they truly got worried seeing XUV face-lift. The amount of changes and feature addition XUV got is infinitely more than what the Storme got. Tata would have felt there is no meaning showcasing this face-lift as eventually they will get criticized for giving so less. And if news are to be believed, Storme will get a proper face-lift in the near future with an auto box. Probably, they will project that as the face-lift and also mention the features they have added now along with it.
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Old 29th May 2015, 20:18   #15
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Oh well, I guess they truly got worried seeing XUV face-lift. The amount of changes and feature addition XUV got is infinitely more than what the Storme got.
Storme is just an example. This is the case for all TATA launches in the "premium" segment. As I said before, Tata updated their ARIA with a more powerful engine, a better infotainment system & ICE, etc. in 2014, all that at a reduced price point; but no fuss at all!! Why?!

Look at the Three refreshes M&M's Xylo received over the years.. minor improvements, still with each refresh, they highlighted the changes as if there were vast improvement. Same goes for their 2014 face-lift as well - updated looks, add an anti-roll bar and they advertise it as if they have improved a lot of things. This is aggressive marketing! I do not believe that TATA's products are inferior to those of M&M's or any other manufactures' for that matter.

Last edited by nerd1200 : 29th May 2015 at 20:24.
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