How Tata Motors became a formidable Number 3 OEM and charted a Turnaround!
Tata Motors domestic passenger vehicle business reported sales of 2,22,011 units in the 11-month period of the FY2021 (Apr’20 recorded Zero volumes due to lockdown), as against 1,31,197 units sold over the entire 12 months of FY2020. The YoY increase in volumes was a stellar 69 percent and placed Tata in a comfortable No.3 spot in the Manufacturer rankings. Tata Motors PV business registered its highest-ever annual sales in 8 years and the OEM is progressing towards double-digit Market Share in FY2022.
The FY2021 volumes are a clear indicator of how Tata Motors is gaining ground in the Indian Passenger Vehicle market. Just over half a decade back, the OEM was in the doldrums. While it was consistently losing Market Share, it was grappling with the image of being an outdated car manufacturer also had a series of quality concerns. Tata was receiving a lot of flak on issues pertaining to quality, cost, and inadequacy in its product portfolio. The OEM was heavily dependent on the entry-level product range (say Indica, Indigo, CS) and its inclination towards the taxi segment tarnished its image for the personal segment buyers.
Do note that the brand was struggling to sustain volumes and the likes of Mahindra and Honda had overtaken Tata in FY2015. Tata Motors' market share hovered ~5% and the portfolio also wasn’t profitable to both OEM and Channel Partners. It had primarily become a discounted brand and a significant share of sales was contributed by the fleet buyers as well.
Tata Motors has made a dramatic turnaround both in terms of volumes and brand image over the past 5 years and FY2021 has been the true testimony of it. In the last Financial Year (Apr’20-Mar’21); Tata Motors has gained the highest Market Share amongst all the car OEMs. It attained a Market Share of 8.2 percent in FY2021 against the Market Share of 4.6 percent in FY2020 (source). Tata Motors was a comfortable >66k units ahead of fourth-ranked OEM and has firmly placed itself in the Third position.
One of the biggest factors for the success of Tata Motors in FY2021 was that the OEM gained volumes and share in all the segments it is present in and the growth reflected in the entire portfolio!
Let us see how the individual models fared in FY2021 –
While the entry hatch segment declined 7 percent in FY2021; Tiago was able to post a 23 percent YoY increase and its Segment Share shot up to 20 percent! Tiago which was primarily born as the successor of the Tata Bolt; has gained acceptability in the segment due to its strong 4-safety rating and overall practicality. Do note that Tiago’s gain in volumes in FY2021 was almost equivalent to Hyundai Santro’s loss.
Altroz had a slow start when it was launched in January 2020. However; the model sales picked up gradually and it was also able to outsell the segment leaders Baleno and i20 in many Indian states in FY2021!
Though the Premium Hatchback segment reported flat growth in FY2021; Altroz was able to gain a segment share of 9 percent in the mentioned fiscal year. The model was able to leverage on the last year’s IPL campaign and got tremendous mindshare too post the tournament.
Nexon was Tata’s bestselling model for FY2021 and also the flag-bearer of the renewed Tata Motors! The model registered a YoY increase of 47 percent; while the segment saw the sales shoot up by 21 percent. Nexon’s segment share was at an all-time high of 15 percent in FY2021!
Nexon’s journey in FY2021 included the model outselling the segment leaders Brezza and Venue in many crucial states (like Kerala and Maharashtra). Nexon also did wonders in the EV avatar and emerged as the highest-selling Electric Car for FY2021. Launched in January 2020, Nexon EV has crossed the 4,000 unit sales milestone which is the highest for any Passenger EV in India. Nexon EV has a 64.4 percent market share in the passenger EV segment for FY2021 (source). Over 6 percent of Nexon’s volumes in FY2021 came from the electric range!
Surprisingly, Tigor volumes shot up 44 percent YoY in FY2021; while the segment sales declined by 27 percent! The model was able to enhance its share in the segment to 7 percent in FY2021, up from 3 percent in FY2020. Was the increase due to the void created by the exit of Etios or the discontinuation of Dzire Diesel?
Harrier + Safari –
Built on the OmegaArc platform, an essentially re-engineered version of the Jaguar Land Rover D8 platform – Harrier had a lot of hopes raised for the OEM when it was launched. However; the initial volumes weren’t encouraging and the onslaught of MG’s Hector bruised Tata’s attempt to make a presence in the segment. The model was also reeling with initial quality glitches and customers were hesitant to invest in Tata’s costliest model!
Come February 2020, Harrier received feature updates including a panoramic sunroof, increased power output, and an automatic transmission sourced from Hyundai. The horsepower was increased to an impressive 170 hp. The initial product issues were also sorted out. It helped the model gain significant volumes in FY2021 and it recorded a 47 percent increase over FY2020. The launch of the seven-seater Safari strengthened Tata’s position in the segment even further. Tata Motors' segment share improved to 7 percent in FY2021 and was up from 5 percent in FY2020.
So basically what worked for Tata Motors over the years –
Rejigged Product Portfolio:
Tata Motors has been decisive in discontinuing products that were not performing well in the market. Nine models namely Sumo, Safari, Nano, Aria, Zest, Bolt, Indica and Indigo were discontinued after 2016 (source). The intention was clear to not continue ailing models which were not apt as per customer expectations and would detriment Tata’s image. It was the first phase of transformation when Tata Motors strategically moved away from an outdated portfolio to more viable and attractive product offerings. It also took the bold step of completely exiting the Taxi market!
The New Range of models Tiago, Tigor, and Nexon – invoked a lot of interest in the younger buyers and helped Tata improve its image as a more Stylish, Quality-oriented, and Updated manufacturer. Tata used its time to slowly upgrade itself and enhance its presence in the segments above – It started off with Tiago/Tigor and moved up to Nexon and finally to Altroz/Harrier and Safari. The OEM strategically timed the models to leverage the success of the lower segment models as it kept launching models in the higher price range.
The company now takes pride in its “New Forever” product range and its attempt to refresh its complete portfolio has yielded positive results.
Key Management Changes –
The early level of the transformation involved bringing in a fresh set of faces to run the show. Guenther Butschek entered the organization in 2016 with the reputation of successfully restructuring organizations such as Airbus. He primarily worked on improving the core processes, enhancing customer-centricity, reduction of top-line costs, and introducing new technologies. In his tenure, he was able to deliver on the promise and the brand did regain its aspirational value.
N Chandrasekaran's entry into the Tata Group as a Chairman in 2017 also helped Tata Motors leverage on the synergy with the group companies. The perfect example would be the creation of the Tata EV ecosystem. Tata Motors has explored and utilized the expertise of multiple Tata companies like Tata Power, Tata Chemicals, and Croma to build the EV ecosystem.
Shailesh Chandra joined Tata Motors in 2020 and helped Tata Motors steer business successfully in a pandemic year! He already had hands-on experience as he earlier headed the Business Transformation, Corporate Strategy, and Electric Mobility Departments in Tata Motors!
Commitment to Safety –
‘Kitni Safe Hai’ suddenly started trending and it was unbelievable that an Indian-make would score a 5-Star in the GNCAP rating! Tata’s Nexon emerged as the first Indian model to score a perfect five stars in the Global NCAP test. It caused a huge perception change and generated a huge pride of ownership for the Tata Cars.
The Build Quality and Safety of Tata models was rightly promoted to appeal the conscious customers. 4 out of the Top 10 Safe Cars in India belong to Tata Motors! Tata’s Altroz, Nexon, Tiago and Tigor placed itself in the Safest Cars list and ranked 4-stars or above (source).
The communication was also iterated in multiple brand campaigns from the OEM (as shown above).
Increased Nationalism and Vocal for Local –
Tata was quick to adopt the ‘Vocal for Local’ campaign post the standoff between India and China in 2020. The India-China border dispute in the Galwan valley generated a lot of attention among the Indian consumers and there was a sudden surge of demand for ‘Made-in-India’ products. It was even accentuated further by Prime Ministers ‘Atmanirbhar’ campaign.
Suddenly the home-grown Tata Motors was able to gain on the nationalism fervor and the consumers proudly flaunting the ‘Indian’ car purchase!
Although FY2021 has been a breakthrough year for Tata Motors; the way ahead will not be that easy. We foresee the mentioned challenges Tata will have to tackle for sustainable growth –
Customer Experience – Tata will have to deliver a consistent customer experience across all channels (sales and after-sales) and need to ensure that cost of ownership too remains realistic.
Sustained Network Expansion – Tata still lags behind the likes of Maruti and Hyundai in terms of the network. It needs to strategically enhance its presence to compete with the market leaders.
Ensure the product portfolio remains relevant and competitive – Tata Motors will have to strive to bring the most updated models in the market and ensure they remain highly competitive.
Ward off competition – New entrants like Kia are aggressively expanding their share. It is imperative that Tata protects its turf.
Strong Future Line-up – Tata Motors' bet in EV portfolio paid off with the success of Nexon EV. Tata will have to innovate similarly and expand its horizon in Petrol, Diesel, CNG & EV range. While we know that Tata is already planning to launch CNG models; we hope it also strengthens its in-house diesel portfolio and reduces its dependence on FCA sourced diesel engines.