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Old 11th October 2017, 11:29   #16
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Default Re: N Chandrasekaran: Every Tata Car - except Indica - is losing money

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Originally Posted by Torquedo View Post

Please, please either change or be ruthless with your "auto ancillary" providers TML on the quality of parts that they supply you with.

These providers have and continue to soil your name in the Indian Automobile Industry.

What an Indian wants from you is the longevity of all the "movable" parts in your machines,
Good point and the one why in 2013 I was willing to gamble only to the extent of Nano for both its price and simplicity in having lesser number of parts that will go wrong. My version has neither power steering nor AMT and I prefer it that way for the same reasons.

The only sustainable way to elevate supply chain quality is by having OE manufacturing and quality teams present on critical to quality supplier shop floors, training and leading vendor quality efforts on a daily basis. TML tends to just demand vendor quality from comfortable offices in the TML works, while beating down vendors down on prices. What you are seeing is the result of this approach. I am out of touch with TML for a few years and perhaps the approach has changed; I won't be surprised if it has not. These cultural changes are hard to make in established organisations.

Last edited by Sawyer : 11th October 2017 at 11:30.
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Old 11th October 2017, 11:30   #17
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Default Re: N Chandrasekaran: Every Tata Car - except Indica - is losing money

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He does not have at his command the competencies needed; no Tata company is a leader in the retail B2C businesses with the shining exception of Titan. Titan succeeded because it was allowed by JRD Tata to be free of Bombay House mentalities/oversight, being entirely led by Xerxes Desai out of Bangalore.

From how the TML leadership has been talking since 2013 on improving the dealership experiences and from the lack of progress seen there, Tata will struggle to get volumes needed for profitability.

I get good service for my 2013 Nano, but often after escalating things to TML management in a way most people cannot. And that way of working isn't a way to manage volumes once obtained.
Thank you for echoing my thoughts exactly. I also find that Tata Motors needs to be prodded from the very top for nearly every issue. Even their own service center Concord is pretty much inept at troubleshooting and resolving issues.

I do hope with the change of guard at the top, some changes happen for the better. There is so much potential in the group and its sad to see it being wasted.
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Old 11th October 2017, 11:37   #18
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Default Re: N Chandrasekaran: Every Tata Car - except Indica - is losing money

The best thing that Tata have done in recent times, is to lose the ancestral Indica baggage.
The Tiago, which has brought in volumes for it, was fresh and was nothing like an Indica.
People just don't want to see the same egg-shape again and again.

The second best thing that Tata should have done, but hasn't done yet, is dealership grooming. Dealerships should be groomed to treat the customers like 'customers'. Nothing more, nothing less.
Sadly, the situation on the ground leaves sizeable scope for improvement.
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Old 11th October 2017, 11:39   #19
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Default Re: N Chandrasekaran: Every Tata Car - except Indica - is losing money

As to changes at the top, from all I have heard and experienced, Karl Slym was doing a great job on all fronts.

But then Tata took close to two years to get a replacement after his untimely exit! With no one inside the company considered to be good enough. Again, the old culture of a General and all the rest being soldiers and no leadership pipeline worth speaking about. It worked well in the old economy and in the business of making and selling trucks in a sellers' market, but the world changed on TML very rapidly and the company still hasn't found a solution to how to change the culture.

So one sees brilliance in bits and pieces of the company, and an inconsistent customer experience.
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Old 11th October 2017, 12:42   #20
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Default Re: N Chandrasekaran: Every Tata Car - except Indica - is losing money

I think you're all reading too much into this so-called "interview". Firstly, I find it hard to believe that *every* Tata passenger car model is making a loss (other than Indica). Secondly, I think Chandrasekaran must have loosely (and inaccurately) mentioned it just to play-along-with/justify RNT's apparent stand of "holding on to the Nano". In my assessment, he seems to have said it like: "Pull the plug on Nano simply bcoz its loss-making? What? Every model is loss-making after all! So why pull the plug on Nano alone, esp when its losses are small compared to losses of other cars in my portfolio?!?".
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Old 11th October 2017, 12:56   #21
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Default Re: N Chandrasekaran: Every Tata Car - except Indica - is losing money

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Originally Posted by Varun_HexaGuy View Post
The same is happening with the Tigor. It was launched at a time where one of it's chief competitor (Dzire) received a major facelift and that contributed to low sales of the Tigor.

IMO, the same will follow the Nexon. It's launched at a time where again one of it's competitor is yet to receive a major facelift (Ecosport) and then again the sales numbers of the Nexon are bound to fall. Till then, will wait and see what our Indian consumers have in store for the Nexon.

Can't agree for the Nexon.


The Tigor was never that ground breaking a product. The Dezire was already a sales mammoth earlier and the recent upgrade has helped it.

But the Nexon is a Ground Breaking Design/Product. It just stands out in a crowd. Plus its also a very good product to ride.

I Don't think the Ecosport Facelift would have any affect on the Nexon.




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Old 11th October 2017, 13:07   #22
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Default Re: N Chandrasekaran: Every Tata Car - except Indica - is losing money

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Originally Posted by vharihar View Post
I think you're all reading too much into this so-called "interview".
...
In my assessment, he seems to have said it like: "Pull the plug on Nano simply bcoz its loss-making? What? Every model is loss-making after all! So why pull the plug on Nano alone, esp when its losses are small compared to losses of other cars in my portfolio?!?".
Agree with your assessment, at least in part.

Surely, every car of a new model "loses money" on a per-car basis until enough copies are sold to recover development (and marketing) costs. No car can make money on a per-car basis from the very first copy sold. Therefore the statement must be true but not surprising for the new models like Tiago, Tigor and Nexon. It maybe premature to declare these as loss making as of now. For the cars with re-engineered but older platforms like the Zest, Bolt, the money lost per car may not be as much as it appears to be because at least a part of the development cost would have been recovered by previous cars like the Indica-Indigo siblings which shared the platforms. The Nano is one car which has been a clear sales dud and unless the platform gets used for a future best-seller (maybe an EV) then could be buried as such.
The essence of Mr. Chandrasekaran's views is that volumes need to pick up. This is of course beyond debate.
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Old 11th October 2017, 14:57   #23
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I think Chandrasekaran is essentially saying that "Tata Motors is making losses" - but in a different way. He is using different words essentially to deflect frequent questioning about Nano losses.

1) Because, saying "every Tata car is making losses" gives an impression that Tata is selling Tiago, Hexa or Safari at a discount. And increasing prices by, say 10%, will somehow swing Tata Motors into profit. But that is not the case. Increasing prices will reduce volumes.

2) For all car manufacturers, raw material expenses are just 70% of revenues. That is, if Tata Nano ex-factory price is Rs. 2.5 Lakhs, it is costing just Rs. 1.9 Lakhs to build. Technically, there is a profit of Rs. 60,000 on every car that Tata Motors makes.

From Maruti's annual report - look at raw materials cost when compared to revenues

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3) The actual "cost" of a car depends on -

- Development costs (salaries + other expenses)
- Cost of new factory including robots, dies, assembly lines (depreciated over the life of car)
- Dealership training, sales & marketing expenses (salaries + other expenses)
- Inventory costs
- Interest costs (Tata Motors has a bank loan of Rs. 15,000 cr)
- Raw material cost

So when Chandrasekaran says "we are making losses on every Tata car", it does not mean anything.

It's just the company's financials are not in such a good state and that they need to sell MORE of each car.

Expanding a bit more on this subject, taking the same Tata Nano example with some numbers thrown in: (all numbers are taken from my hat)

Tata Nano development costs: Rs. 500 Cr (one time)
Tata Nano factory cost: Rs. 4,000 Cr (Rs. 500 Cr own cash, Rs 3500 Cr borrowed from bank)
Interest cost on bank loan: Rs. 350 Cr per year (at 10% per year)
Inventory cost, marketing cost & other cost involved in selling Nano: Rs. 50 Cr per year.

Since Nano is a low 'margin' car, assume that raw material costs are 80% of ex-factory price of Rs. 2.7 Lakhs - meaning Tata makes Rs. 50,000 per Nano (I'm being generous here, avg ex-factory price of Tata Nano sold could be much lower).

At the current sales volumes of 10,000 per year, Tata generates income of Rs. 50 Cr. Now this Rs. 50 Cr has to not only take care of huge interest costs, but also to recover the huge cost sunk in to develop the car and to build the factory. Forget profits, this is just to breakeven. The solution to this problem is NOT to hike prices, but to increase volumes. Every extra 10,000 units per year sold makes the profitability issue much easier to resolve.

Basically, a car project's profitability depends on (PRICE + VOLUMES). The latter is extremely crucial

Last edited by aah78 : 11th October 2017 at 17:09. Reason: Back-back posts merged/as requested. EDIT: 500 -> 50
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Old 12th October 2017, 14:35   #24
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Default Re: N Chandrasekaran: Every Tata Car - except Indica - is losing money

cross posting from the nexon thread
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Originally Posted by amit_mechengg View Post
This is what we call as "Value for Money". Believe me, when you buy a tata car the cost of components used to build the car is really more than the competition.
You're right - and even the Tata group chairman explicitly said this.
But then you wonder, If a business sells you something at a loss, they are going to make money out of it somewhere, and you have no idea from where. Probably Tata motors doesnt know either, but you wonder about their motives and sustainability
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Old 12th October 2017, 15:29   #25
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Default Re: N Chandrasekaran: Every Tata Car - except Indica - is losing money

There is no way that TML is selling cars at a loss per unit on a marginal cost basis. They are not stupid. If they did that, the more they sold, the higher would be the losses.

What they mean is that the volumes on no car are enough to absorb all the overhead that can be ascribed to the model. So there needs to be much more volume driven contribution from the cars so that all overheads are covered, leaving some profit on hand.
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Old 12th October 2017, 15:47   #26
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Default Re: N Chandrasekaran: Every Tata Car - except Indica - is losing money

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Originally Posted by greenhorn View Post
cross posting from the nexon thread

You're right - and even the Tata group chairman explicitly said this.
But then you wonder, If a business sells you something at a loss, they are going to make money out of it somewhere, and you have no idea from where. Probably Tata motors doesnt know either, but you wonder about their motives and sustainability
Yes the chairman is right. They are doing this as a part of brand building. They have plans in place which will depend on volume.
If we see the service part , there too they have all AMC plans right from small cars to UV. Here too customers are at gain.
Sadly average indian customer will never realize this as they run behind the brand.

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Originally Posted by Sawyer View Post
There is no way that TML is selling cars at a loss per unit on a marginal cost basis. They are not stupid. If they did that, the more they sold, the higher would be the losses.

What they mean is that the volumes on no car are enough to absorb all the overhead that can be ascribed to the model. So there needs to be much more volume driven contribution from the cars so that all overheads are covered, leaving some profit on hand.
Yes that right, i have personally seen the bill of material on aria etc since i was handling their SAP systems. i have seen BOM of many other cars as well.
Their game depends on volume. The investments are huge. Tata invests the highest amount for every platform unlike other manufacturers who just bring in the global platforms and sell here.

Sadly many indian customers do not critically examine and see what goes in to manufacture the car they are buying vs what they are paying. Hence tata doesnt get volumes.

Example - Hexa has an electronic garrett turbo, Harman 10 speaker unit etc which costs a lot than competitor who is using a TEL vacuum turbo with a Nippon delhi assembled unit.
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Old 12th October 2017, 16:22   #27
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Default Re: N Chandrasekaran: Every Tata Car - except Indica - is losing money

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Originally Posted by amit_mechengg View Post
Their game depends on volume. The investments are huge. Tata invests the highest amount for every platform unlike other manufacturers who just bring in the global platforms and sell here.

Sadly many indian customers do not critically examine and see what goes in to manufacture the car they are buying vs what they are paying. Hence tata doesnt get volumes.
All car makers need volume. The Tata weak point is not having global scales of sales and volumes that can absorb the investment needed; in fact Tata prides itself on needing lower investment spend that any other foreign make for platform development, but that still isn't getting covered by the volumes generated. Foreign makes spend more on development, but can also tap global markets for the higher volumes needed to still come out ahead. Tata not only does not sell as much as other makes do in India, but their passenger car exports are also close to non existent.

Indian customers are quite rightly not bothered about what is in the car they are buying. They are correctly interested only in the end result of reliability of the purchased package and a trouble free service life based on assured/consistent after sales service. As a car buyer, I care only about the outcome. And unless enough of us get that to the extent we believe is necessary, the volumes will remain a challenge. Existence of a few enthusiasts like there are for Fiat isn't enough for corporate survival.

Last edited by Sawyer : 12th October 2017 at 16:23.
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Old 12th October 2017, 19:18   #28
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Default Re: N Chandrasekaran: Every Tata Car - except Indica - is losing money

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Originally Posted by abhishek46 View Post
The second best thing that Tata should have done, but hasn't done yet, is dealership grooming. Dealerships should be groomed to treat the customers like 'customers'. Nothing more, nothing less.
Sadly, the situation on the ground leaves sizeable scope for improvement.
Agree but the challenge Tata has is that they have a sizable taxi / commercial business in taxis. Hence, all customers pretty much get treated as the lowest common denominator. I am not saying others do this better. I am just observing this as a challenge. Treating a Hexa customer the same way you'd treat an Indica cab driver may not go well for ego reasons. We want to be treated like a king (nothing wrong in that) but also better than someone who has paid for a lesser product. Snob value blah blah. Unless Tata finds a way to get their service centers to differentiate between these segments, it will continue to deliver an at-or-subpar experience to their retail segment.
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Old 12th October 2017, 19:41   #29
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Default Re: N Chandrasekaran: Every Tata Car - except Indica - is losing money

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Originally Posted by Mad Max View Post
Agree but the challenge Tata has is that they have a sizable taxi / commercial business in taxis. Hence, all customers pretty much get treated as the lowest common denominator. I am not saying others do this better. I am just observing this as a challenge. Treating a Hexa customer the same way you'd treat an Indica cab driver may not go well for ego reasons. We want to be treated like a king (nothing wrong in that) but also better than someone who has paid for a lesser product. Snob value blah blah. Unless Tata finds a way to get their service centers to differentiate between these segments, it will continue to deliver an at-or-subpar experience to their retail segment.
There is nothing wrong in treating the Hexa owner in the same way as a humble Taxi guy.
Both are humans and customers too.
Both should be treated appropriately as customers without bias.
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Old 12th October 2017, 20:16   #30
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Default Re: N Chandrasekaran: Every Tata Car - except Indica - is losing money

I agree; and the best of the Toyota dealerships have shown that it is possible to treat all customers well. If there is a well designed and implemented service process that serves me well, why should I care if the person next to me, being served equally well, is a taxi driver/owner?
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