Potential buyers are now at least considering a range of Tata Motors cars as its new gen Tiago hatchback, Tigor compact sedan and Nexon compact SUV gain popularity in India. Guenter Butschek, CEO & MD of Tata Motors reveals the brand’s journey to build a culture of winning decisively in commercial vehicles, sustainably in passenger vehicles, and proactively in electric vehicles, during an interview with Michael Gonsalves. Edited excerpts:
Your new car models such as the Tiago hatchback, Tigor compact sedan and Nexon compact SUV are driving up sales volumes and market share in India. What has really changed at Tata Motors?
The spirit of Tata Motors, that’s what has really changed. With a single-minded focus on execution of our Turnaround plans, we are now a renewed organisation, raring to reclaim our position in the market place. Our brand purpose ‘Connecting Aspirations’ lays this foundation well within our ecosystem. We are currently on our journey to build a culture of winning decisively in commercial vehicles or CV, sustainably in passenger vehicles or PV, and proactively in electric vehicles or EV.
Being a challenger brand in PV, the only way we could win sustainability in the market is by expanding our product range in growing segments and by making our brand attractive to the personal consumers. Our aggressive market launches over the last two years are a testament of our intent.
Strikingly new Impact 2.0 design, power pack feature rich offerings and competitive pricing have been our biggest thrust areas. We have been innovative in connecting with the new millennials through aggressive marketing campaigns such as experiential centers, building our brand consideration and perception.
With our new generation products, our addressable market has increased to 70 per cent and personal: fleet share has completely reversed to 85:15 from earlier 20:80. Our Net Promoter Score (NPS) has improved from (-1) to (+14) in last three years and our consistent focus on after sales service achieved us rank no. 2 in the JD Power Customer Service Index.
We have widened our sales network from 400 to 750 outlets and are prepared to reach to 850 by end of this year. Our sales force has doubled from 4,300 to over 8,500, in a short span of time, which will further be boosted to 10,000 by end of the year.
Our consistent month-on-month growth has resulted in Tata Motors outperforming the industry growth for 33 consecutive months now. I can promise to our customers that this is just the beginning.
In Q1 of 2019, your passenger vehicle sales clocked 58,969 units and market share at 6.75 per cent, placing you fourth in the pecking order in the car market. What is your growth plan from here? When are you targeting to be at the third position after Maruti Suzuki and Hyundai brands? What are your plans and when are you going to achieve break even in passenger vehicle business in a fiercely competitive car market with more attractive models to woo buyers?
I would be careful in answering as this should not sound arrogant to the readers. Yes, we have been growing in market share and aspiring for the No.3 position. But the question is to achieve this sustainably. To our interest, I would like to realise this as soon as possible. And, the strong indications from the market are a proof point that we are already demonstrating strong performance in some parts of the country. Our target is to win regions first before going national.
With the Q1 segmental reporting of PV, CV, the market has already witnessed the first signs of our Turnaround playing in full rigour with PV almost at breakeven. I am confident that with our aggressive cost reduction plan, continued upselling of our recent launches, careful investments into our future product offerings, we should be able to achieve the breakeven in passenger vehicles business in a short term.
The shift to a dual platform strategy and 12-14 new/renewed nameplates by 2022 will help us leverage cost benefits from better economies of scale.
What is your Turnaround 2.0 strategy for passenger vehicles at Tata Motors? Is it showing any results on the ground level?
Turnaround 2.0 is an extension of our plans in sales enhancement, cost reduction and supply debottlenecking in passenger vehicles business, which was earlier centered around commercial vehicles business, our financial backbone of the company. With the same single minded focus on execution, we are already seeing positive results in areas of better contribution margins, sales activation and business profitability. We have grown by 37.9 per cent in the April-August period while the market grew at 9.7 per cent.
While the industry declined in the last two months and 14 out of 17 players experienced de-growth, we continued to post a positive growth in our sales performance. We are hopeful to continue this momentum in the upcoming festive season by a firework of 4 new launches in PVs.
How viable is the electric mobility business in India? What is the status of your Tigor electric vehicle? Has the Government halted buying them after some controversy regarding its performance?
Electric mobility is one of the core pillars of our CESS strategy (Connected, Electric, Shared and Safe), in line with the Sustainable Mobility Vision outlined by the Indian government. With Government’s continued thrust on accelerated adoption of e-mobility through enabling policies and with the continued reduction in battery prices, we expect a sharp rise in demand for electric vehicles in the coming years. To leverage on this opportunity and to give it the topmost priority, we have created a new business vertical.
With strong in-house engineering capabilities, Tata Motors is the only company in India with a comprehensive portfolio of cars, buses and last mile connectivity solutions – some already launched while others ready for commercialization. Our recent foray in the e-mobility space through Tigor EV is a result of strategic collaborations with partners like Electra EV. The Tigor EV has been customized to meet EESL’s requirements and optimized tender specifications, which balances the range and price accessibility. The tender required the car to have 130 kms range under standard conditions, whereas the Tigor EV delivers a certified range of over 140 kms. The issue of low range has already been clarified by EESL. We are in constant dialogue with EESL and our deliveries are aligned as per the plan. We also won the order for supplying Tigor EVs to Cognizant in Hyderabad.
To strengthen the e-mobility portfolio, Tata Motors is developing a full range of products. We are in a unique position to leverage on mutual strengths and competencies of the Tata Group companies, where we are working with Tata Power, Tata Motors Finance, TCS, to offer a full ecosystem solution to the customers.
India overtook Germany as the fourth largest automobile market recently. What is the potential of Indian automobile market in the near and long term?
Growing at a CAGR of 8-9 per cent, we all expect passenger vehicle industry alone to be about 10 million units per annum by 2030. The scale of operations therefore, will increase nearly three times of the present levels.
The auto industry has always been the engine of the economy. It is now transforming into a mobility ecosystem, constantly being re-defined and India is at the cusp of taking its next big steps. The only difference here would be to create an inclusive, sustainable ecosystem which addresses the prevailing challenges and provide solutions locally, leveraging technology and new business models.
What are your expectations from the Indian Government to expand this market and to sustain it?
India needs connected, electric, safe and shared vehicle mix to support urban transport, enabled through sustainable and economical passenger and cargo mobility solutions. We are catching up with the global standards in terms of emission, safety and advanced features.
The automobile industry needs a robust policy framework with all stakeholders’ alignment and implementation support from the government. This will enable the auto industry to ‘very carefully prioritise’ and put ‘right resources behind’ going forward.
You have been steering the biggest automobile firm Tata Motors for over two-and-half years. What were some of the challenges you faced? Have you achieved what you set out to do when you took over?
It has been a very exciting journey for me personally since 15 February 2016. It was exciting because of the challenges, and some of them were even somewhat unexpected, given the regulatory framework but we sailed through. We have achieved several milestones through the launch of our transformation strategy, which was followed by shifting gears to the Turnaround plan. In 2016 there was a sense of urgency with weak market activation, with lack of new products. We had pressure on our margins coupled with a complex organization structure. Focus in 2016 was to kick start business transformation. Board approvals were taken. We launched six angles of attack:
1. Intense Topline focus
2. Customer Centricity
3. Process Improvements
4. Agile Cost Management
5. New Business Models
6. Lean & Accountable Organization
The High potential initiatives were prioritized under ImpACT –Improvement by Action
*Market & Financial Focuses
In 2017, amid challenging market conditions that included GST, aftershocks of demonetisation, Diesel Gate and BS4 emission norms, we needed to shift gears and we immediately moved from Business Transformation to Turnaround with a single-minded focus on execution. The key approach was
*Sales Enhancement – focus on the CV domestic business
*Rigorous cost Reduction and bottom-line improvement
*Leveraging product & supply chain efficiencies
With the Organization Effectiveness programme we launched the new Organization structure with a clear objective to make bring speed, simplicity and agility. We reduced the decision making levels significantly from 14 levels to 5 levels and used ring fenced teams for special projects for improved agility.
We also launched our new brand identity, ‘Connecting Aspirations’ which recently completed its first anniversary. Our brand perception has overall improved. I am happy to share with you that without investing in any marketing campaigns and with sheer word of mouth, our brand promise has resonated well across stakeholders. This one year, we have seen several examples of how teams have embraced it. Whether it is the ring-fenced team who in such short span of time made the Tigor EV project possible or the cross functional ImpACT project teams who have found solutions to critical areas of the businesses, again in short time.
We have set new benchmarks in the CV and PV market with new products. Our growth trajectory continues, with profits increasing every quarter and sales volumes growing month on month. On the CV Business front, constant flurry of products, technological interventions kept us in the news and customer’s preferred choice with renewed trust and confidence. Our PV business bolstered by the strong performance of our new generation cars has witnessed a strong growth, outperforming the market consistently month over month.
FY18 has been a hallmark year for Tata Motors with a record breaking sales performance, increase in market share and the standalone business turning profitable before one-time exceptional charges. We are witnessing a strong run in this quarter and we expect it to continue. We still have a long way to go and I am hopeful that if we continue to strive at this pace, we will be successful on a steady state.
All these and many more such examples give me the confidence that teams across Tata Motors are committed to our brand promise and are living it by the day. I have had the support of a very strong executive committee and we have taken some hard decision for the company. I am also glad that the turnaround culture is working and all our employees have accepted this culture whole heartedly. It’s been a rich learning experience because the Indian market is a very dynamic one. One never stops learning even after 30 years of experience in this industry.
You come with a rich and varied international exposure, how easy or tough and challenging has it been to work with the Indian managers at Tata Motors?
When I accepted the opportunity to join Tata Motors two and half years ago, I knew this is going to be an extremely demanding and challenging task. Also, because of high level of expectations. With the initial dip stick done to asses organisational health, lack of execution came as the biggest concern. We quickly had to come to the reality to sense the urgency to change, the willingness to change and own the change. Everybody in the organisation needed to be a part of this change and this was the biggest challenge. With new mission, vision and values and structural changes performed in the FY17, the organisation was brought back to speed, further accelerated by a comprehensive turnaround plan launched in July 2017.