Will New Launches Be A Game-Changer For Tata?

Tata Motors Limited (TML), on 17 September 2012 launched 6 new Medium and Heavy Commercial Vehicles (M&HCV) to strengthen its performance in Commercial Vehicles (CV). TML has been witnessing subdued sales volumes since the beginning of the financial year on account of poor macroeconomic cues, lower agricultural, industrial and construction output and high interest rates.

YoY Sales Volume Growth (%)

While Light Commercial Vehicle (LCV) sales have been strong, in the range of 8.84 per cent and 25.58 per cent over the corresponding period in the previous year, M&HCV sales have been highly negative, lower in the range of 12.1 per cent and 29.47 per cent. Because the second half of the financial year is home to stronger sales, particularly the last quarter, TML expects sales to increase by 15 to 20 per cent as compared to the first half of the year.

What added to the troubled M&HCV sales was the steep diesel price hike of Rs.5 per litre that translates into a higher figure considering taxes. Fleet owners were undoubtedly disappointed over this and it instantly seeped into a 15 per cent hike in freight rates. Demand for M&HCVs had anyway seen a plunge due to rising ownership costs that included higher spending on EMIs, tyres, spare parts and lubricants. The diesel price hike would only add to these woes and further hamper sales.

To turn the M&HCV sales trend around the growth and to capture the opportunity offered by the second half of the year, TML launched 6 vehicles last week. Of these launches was a first of its kind 37 tonne, 5 axle truck which can carry 4.5 tonnes more than the current multi-axle 31 tonne vehicles thus reducing the cost per tonne-km for transporters. Furthermore, by incorporating twin steerable front axles, a twin drive axle and a tag-lift axle, the model reduces tyre and fuel costs. All of these factors work on positioning the truck as a model that reduces overall cost of ownership thus placing it in the right direction at the right time, making it a potential winner.

TML also launched the 3138 K, specifically designed for deep mining that has a stronger chassis, advanced braking systems and a hub reduction axle making it specialised for mining operations. The 4938 S too is a high-potential launch that makes it the first Indian tractor-puller for logistics of heavy and over dimensional cargo. It is the most powerful Indian cargo truck with a 370hp engine and 1550nm torque. Such trucks had to be imported but TML would now offer it domestically at relatively cheaper rates.

TML also launched 2 trucks to strengthen its Tata Prima 230hp LX range with better fuel efficiency and 9 speeding gears and a 4 axle tipper designed for coal and earth work due to the increased demand for performance oriented and fuel efficient tippers.

 All of these launches focus on reducing the ownership costs for owners at a time when the market is becoming increasingly price sensitive. They are also equipped with Tata FleetMan telematics services providing facilities like vehicle tracking, alerts, trip management and remote diagnostics. Focussing on performance-oriented, need-specific and fuel efficient vehicles definitely sounds like a good strategy that fits in well with the current market situation. The trucks are well positioned and have the capacity to turn trends around in the company’s favour thus boosting overall performance. Since demand is low at the moment and a reversal is expected, TML would benefit from these launches considering a time horizon of 1 year or more.