Mistry admits FY15 will be tough, bets on Zest and Bolt to revive Tata Motors' fortunes

Tata Motors chairman Cyrus Mistryon Thursday told the company’s shareholders that the carmaker is going to face yet another tough year as the transformational work that the company is undertaking will take time to fructify. He clarified the auto market itself has not been good, but admitted Tata Motors performance could have been better.

“We accept that the India business has not been doing well and FY15 is going to be tough as well,” Mistry told shareholders at the 69th annual general meeting of Tata Motors in Mumbai.

Tata Motors’ domestic business has posted losses in four of the last eight quarters. While itstrucks and buses segment has dominated the Indian market, the passenger vehicles have failed to lure customers away from rivalMaruti Suzukiand foreign competitors, including Hyundai Motor Co and Honda Motor Co, which is why perhaps the company is now betting onthe entry-level sedan, and Bolt, a hatchback to revive its fortunes in the passenger car market and regain market share.

Tata Motors, which used to consistently feature among the country’s top-five auto manufacturers, slipped to the sixth position (behind Maruti Suzuki, Hyundai, Honda, Mahindra and Toyota), notching up sales of 7,911 units in June compared with 11,804 in the same month last year.

“A lot of work needs to be done. This year is also going to be challenging. The last couple of years we saw the highest intensity of launches from the competition. Tata Motors had to go through a process of transformation. We have to bring up the game up to a certain level,” Mistry was quoted as saying by the Business Standard when shareholders quizzed him on why Maruti, Hyundai and Mahindra & Mahindra had cruised past Tata Motors .

The company will launch the Zest later this month, while the hatchback Bolt will be unveiled later this year.

Tata Motors is looking to launch new vehicles every year and would spend around Rs 3,500-4,000 crore as capex this year, which is more than its earlier guidance of Rs 3,000 crore year.

Lack of a product pipeline, efficient markets, an image that its cars are not cool because they are used as taxis and the legacy of its ultra-cheap Nano, perceived as a poor man’s car, has put Tata Motors out of favour with buyers.

“We test drove the three versions of Zest - petrol with Revotron, diesel manual and diesel AMT. The company has made significant efforts at improving the look-and-feel as well as technology,” brokerage Citi wrote in a note recently.

They believe that the new models and the technology could counter the negative image consumers have about Tata Motors. So ifZest and Bold perform, they may actually manage to lift Tata’s brand image out of the muck and give a boost to its otherofferings as well.

However, the brokerage has cautioned that it will takeat least three years before the fruits of the company’s product planning, dealer development, etc., are seen and does not see a revival in profitability and margins before FY16.

The company is also working on aggressive cost reduction measures, which will result in cost savings of around Rs2000-3000 crore only over the next 2-3 years.

With inputs from Reuters