CAN nanomania revive Tata Motors?

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So the core team at Tata Motors is working over time to deliver on the Ratan Tata promise. Never mind that the company can produce only about 3,000-4,000 units of Nano per month for now (from the Patnagar and Pune plants, say sources), as the Gujarat plant is not yet ready. Given the few thousand units of Nano, which will be ostensibly ready by the launch date, sources opine that it will be a mere farcical launch, with the waiting period for deliveries stretching to even 6-9 months! The company, on its part, has issued a virtual whip on its vendors, dealers and other partners to not say a word about the launch strategy. Mahesh Chauhan, CEO, Rediffusion DY&R, which won the creative duties for Nano, is upbeat on the ‘rewards’ for the agency, but mum’s the word on strategy. “It’s work in progress,” is all he says.

In the meantime, the buzz about the Nano is reaching a crescendo amidst the junta, ahead of its official launch. PR and publicity stunts are at their peak, if you take into account the ‘pilgrimage’ that Nano is being taken for across India – Golden Temple, Amritsar; Ajmer Sharif, Rajasthan – to invoke divine blessings and also contributing to the hype among curious onlookers. But will this NanoMania be able to stem the mounting losses at Tata Motors?

Before answering that however, it may be advisable to look into the company’s plummeting profitability. From earning a Rs.500 crore profit in the same quarter last year, in the third quarter of FY09, Tata Motors recorded a loss of Rs.263 crore – a steep dip of 152%, its first in seven years! Worse, the fall would have been steeper, if not for the fact that the group sold off its investment in Tata TeleServices at a profit of Rs.478 million in the same quarter and attracted another Rs.1,740 million via a new FD scheme for the public.

For those wondering why we are singling out Tata Motors when the entire automotive sector is gasping under the slowdown winds, the answer is elementary. While every automaker has taken a hit in numbers, Tata Motors has by far seen the worst casualty (see chart). This is because a major chunk of Tata Motors’ domestic sales come from the commercial vehicle segment, which has been badly hit due to the economic slump. A tightening of credit supply from commercial banks for auto loans is the other spoilsport, which is also playing havoc with passenger vehicle sales. The fact that Tata Motors does not have latest variants of its cars in the market (perhaps because the Nano obsession has taken all their mindspace) is another dampner. So after months of decline, when Tata Motors passenger car sales rose (albeit incrementally) in February, it was on the back of their only launch in recent months – the Indica Vista!

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Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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