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BW Businessworld

Navigating Challenges

Tata Motors has focused on refreshing its portfolio, improving structural efficiencies and streamlining internal processes.

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Much before the onset of the coronavirus pandemic, the Indian automotive sector was already in turmoil and facing challenges like declining demand, increasing costs, growing competition and what have you. “A slowing domestic economy, muted demand across other geographies, regulatory transitions (emissions, safety and axle load), pricing pressures and geopolitical conflicts put our resilience to test,” the company told its shareholders in its annual report for FY20.

“Cognisant of the possible rough road ahead, we started our FY20 journey with a clear objective to take our turnaround to the next level by enriching our product portfolio, accelerating retail sales, enhancing customer experience and being even more prudent in managing liquidity and costs,” said Guenter Butschek, CEO and Managing Director, Tata Motors.

Going beyond the necessary technology upgrade needed for the mandatory transition to BSVI, Tata Motors unveiled a future-ready product portfolio. This included the Altroz, India’s first Global New Car Assessment Programme 5-star safety-rated car (a premium hatchback built on the Alfa platform); the refreshed BSVI Tiago, Tigor, Nexon and Harrier; and new launches such as the Intra and the 55-tonne Prima in the CV space, with 140-plus type approvals and around 19 engines. The mandatory transition to BSVI norms, effective April 1, 2020 necessitated a meticulously planned strategy to minimise BSIV inventory carryover. “Our early and conscious focus on retail sales, against the industry norm of wholesale, helped us achieve the target of zero BSIV vehicle stock,” said Butschek.

FUTURE READY: During the year, the company announced strategic initiatives to make the organisation more resilient, agile and future-ready. Subsidiarisation of the passenger vehicle business enabled the realisation of its full potential with mutually beneficial strategic alliances and better access to products, architectures, powertrains, new-age technologies and capital. Reimagining its front end would drive superior customer experience and improve market performance, it said.

Over the past two financial years, Tata Motors has focused on refreshing its portfolio, improving structural efficiencies and streamlining internal processes. In doing so, the company has turned a corner and delivered improved market share, profitability, and positive free cash flows. In FY19, the company delivered positive net profit of Rs 2,021 crore, after making losses for five years. In both FY18 and FY19, Tata Motors delivered positive free cash flows, after a gap of five years. However, in FY20, this turnaround journey was interrupted as demand deteriorated sharply due to a slowing economy halted in its tracks by Covid-19.

For now, the company remains focused on executing a senior leadership led comprehensive Business Continuity Plan (BCP) to manage an effective restart and ensure the early revival of its ecosystem. With the safety and well-being of its employees, customers and partners as its utmost priority, Tata Motors says it has resumed operations at all its plants after taking the requisite precautions (post-coronavirus outbreak, lockdown and the unlock phases).

According to Tata Motors, the demand scenario is expected to remain uncertain even as the need for safe personal mobility evolves into a new area of focus. Accordingly, the company continues to build agility to respond dynamically to the changing consumer behaviour through a closer connect with customers. “We are building a profitable roadmap by reducing the breakevens, improving cash generation and deleveraging the business. A cash improvement programme of Rs 6,000 crore (including a cost savings programme of Rs 1,500 crore) has been called out. Our refreshed BSVI product portfolio with customised offerings and enhanced customer experience will help improve our market share. We expect to end FY21 with positive free cash flows,” said Butschek