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TOWARDS A NEW DAWN EXPLORING AVENUES OF FUTURE PROFITABILITY
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  • TOWARDS

    A NEW DAWN EXPLORING AVENUES O

    F

    FUTURE PROFITABILITY

  • Background of Tata MotorsTata group of companies was founded by Jamsetji N Tata in the second half of the 19th century, when

    India was still under British Rule. A vtisionary entrepreneur, an avowed nationalist and a committed

    philanthropist, Jamsetji Tata helped pave the path of Indias industrialisation by seeding pioneering

    businesses in sectors such as steel, energy, textiles and hospitality. The Tata group comprises over

    100 operating companies in seven business sectors: communications and information technology,

    engineering, materials, services, energy, consumer products and chemicals. The group has operations

    in more than 80 countries across six continents, and its companies export products and services to

    85 countries.

    Tata Motors is Indias largest automobile company, with consolidated revenues of INR 1, 88,818

    crores (USD 34.7 billion) in 2012-13. It is a Fortune 500 company,with presence both in India and

    across the globe. Established in 1945, Tata Motors presence cuts across the length and breadth

    of India. Today, over 7.5 million Tata vehicles ply on Indian roads, since the first truck rolled out in

    1954. The companys manufacturing base in India is spread across Jamshedpur (Jharkhand), Pune

    (Maharashtra), Lucknow (Uttar Pradesh), Pantnagar (Uttarakhand), Sanand (Gujarat) and Dharwad

    (Karnataka). It has also acquired Daewoo Commercial Vehicle Company (now Tata Daewoo) of South

    Korea, Hispano Carrocera of Spain, and has a joint venture with Marcopolo of Brazil for manufacturing

    fully built buses and coaches. In 2008 Tata Motors bought over marquee car brands Jaguar & Land

    Rover from Ford. Tata Motors also has a majority stake in Italian design and engineering company

    Trilix. It is the leader in commercial vehicles in almost all segments, and amongst the top 5 in

    passenger vehicles with winning products in the compact, midsize car and utility vehicle segments.

    It is also the worlds fourth largest truck and bus manufacturer. Tata Motors Groups over 60,000

    employees are guided by the One Team One Visionphilosophy - to be passionate in anticipating

    and providing the best vehicles and experiences that excite our customers globally.

    Evolution of Tata Motors Commercial Vehicle (CV) BusinessTata Motors commenced production in 1954 with the manufacture of medium commercial vehicles

    in collaboration with Mercedes Benz. The import content was slowly brought down over the years,

    and by the year 1969 when the collaboration ended it was almost negligible. Tata Motors had by

    then developed the knowhow to design its own vehicles. By the seventies the company broadened

    its range to include Heavy commercial vehicles with products of its own design. It went on to lead

    the M&HCV segment in India. Over the years Tata Motors has got into many new segments in the

    commercial vehicle segment and also created segments of its own with innovative products like the

    Tata Ace, Zip, Magic & Iris. It has gone on to be the market leader in almost all the segments that it

    operates in the commercial vehicle space.

    1

  • 2Global Commercial Vehicle Business (in the last 5 years)The commercial vehicle business around the world is cyclical in nature in terms of sales. Similar

    pattern has been seen in the last 5 years. The period between FY 2008-09 was particularly severe

    on the commercial vehicle industry with most Original Equipment Manufacturers (OEM) suffering

    huge setback in terms of sales. OEMs from established markets continue to face a number of

    challenges to maintain or grow their market position in their respective domestic markets. These

    include increasingly stringent regulations, rising fuel prices and largely saturated markets.

    The balance of power in the global commercial vehicle market has changed decisively over the past

    five years. Between 2006 and 2010 Western Europes share in commercial vehicle market fell from

    10 to 7 percent & in North America it fell from 50 to 32 percent. Market share losses of the saturated

    markets contrast with strong market share gains in the emerging markets. China sharply increased

    its global market share in 2009 by about 10 percent to 28 percent, replacing the US as the largest

    commercial vehicle market, largely due to governmental support initiatives. By 2010, Chinese global

    market share had already grown to 30 percent. India enjoyed similar although less spectacular

    growth. Asia is now by far the largest region for commercial vehicle sales, accounting for nearly one

    in two commercial vehicles sold worldwide.

    The commercial vehicle market will continue to grow over the coming years, with a fundamental

    rebalancing of the global market. The worldwide distribution of power within the commercial vehicle

    industry has shifted since 2006. Asian manufacturers have secured a stronger position at the expense

    of globalmanufacturers, such as Daimler, Volvo Trucks and Paccar, which previously dominated the

    heavy duty market.

    Indian Commercial Vehicle Business (in the last 5 years)Road has always been the dominant mode of transport in India, accounting for around 60% of the

    total transport volume, in spite of them being narrow and congested with poor surface quality. Due

    to the long-standing history of poor quality roads and low customer expectations, Indian trucks

    have traditionally been technically unsophisticated and are mainly operated by owner-drivers who

    typically take care of their trucks maintenance and repair themselves.

    Like most emerging markets, low-cost trucks dominate the Indian market. However, India has been

    subject to slightly stronger fluctuations in terms of commercial vehicle development. One peculiarity

    of the Indian market structure is the high percentage of light trucks. The Indian market is largely

    consolidated, with a 90 percent market share split between the top 3 Indian manufacturers.

  • With the opening up of economy, India has been gradually reducing protectionist measures since

    the early 1990s. The automobile industry has completely opened up to foreign investments. Import

    regulations and customs duties no longer constitute a true barrier for completely knocked down

    (CKD) and completely built up (CBU) production. Big global players like Daimler & Volvo have entered

    into the Indian market taking advantage of this favourable investment environment. Daimler has

    formed a subsidiary, Daimler India Commercial Vehicles, and recently announced its own brand

    for the Indian market BharatBenz. Volvo entered the luxury bus segment in 2006 and is leading

    player in this segment.In 2008, Volvo Trucks formed a Joint Venture (JV) with Eicher Volvo Eicher

    Commercial Vehicles (VECV). Under this JV, Volvos heavy duty trucks are being offered in India in

    addition to trucks and buses already provided by Eicher. These organizations have clearly given an

    indication about their long term strategy for the Indian market.

    Tata Motors Commercial Vehicle BusinessMedium & Heavy Commercial Vehicles (M&HCV)

    Commercial vehicles are divided into various categories based on their usage, load capacity etc.

    Figure 1 gives an illustration of the basic categorization of commercial vehicles. At Tata Motors, the

    M&HCV product line is broadly divided under 2 categories, namely Cargo and ConsTruck. While

    Cargo line has normal load carrying trucks, ConsTruck Range of trucks is engineered to meet the

    demands of the construction and mining industry. The cargo product line is further bifurcated on

    tonnage and has a range from 16 tons to 49 tons. Similarly the ConsTruck range has trucks and

    tippers with tonnage from 16 tons to 31 tons. The various product categories of Tata Motors in

    M&HCV segment, with sample models is given in the Annexure I (Figure 2)

    After experiencing a volume growth of over 30% during 2009-10 and 2010-11, the buoyancy in

    domestic CV industry has been on a wane. The M&HCV industry bore the brunt of slowing industrial

    activity, weak investment sentiment and the impact of significant fleet capacity addition over the

    past three years, especially in the heavy-duty categories of the trucking market. Within the M&HCV

    segment, the contraction in demand for the higher tonnage category of trucks such as tippers,

    tractor trailers and multi-axle vehicles (MAVs) has been the sharpest. These factors caused M&HCV

    volumes to shrink by a sharp 29% Year-on-Year in FY 2012-13.From transporters viability standpoint,

    the current phase is characterized by reduced cargo volumes, stiff competition owing to surplus

    capacities (M&HCV sales doubled from the lows of FY 2008-09, bringing down the average age of

    M&HCV population to a 10 year low) and rising operating costs, especially in wake of the recent hike

    in diesel prices.

    Competitive landscape in the M&HCV industry has been changing very fast. The industry which had

    2-3 major players, mostly domestic before 2005, has today seen the entry of major global players

    into it. Today the industry has more than 10 global and Indian OEMs fighting it out in the market.

    The latest entrant into this field is Diamler with its Indian subsidiary Daimler India Commercial Vehicle

    3

  • (DICV). Like Tata Motors it is a full range player and is expected to compete with Tata Motors in almost

    all segments. Globally, in all big CV markets with majority of the players competing in the market,

    the market leaders command only a 20 25% market share. Tata Motors enjoys a unique position in

    the M&HCV industry in this regard. It has a 62% market share in this segment. The challenge before

    Tata Motors is to retain the same and further enhance it, thus reversing a global trend in the Indian

    market.

    Light & Intermediate Commercial Vehicles (L&ICV)

    In 1981 the Govt. allowed 4 Japanese firms Toyota, Mitsibushi, Mazda and Nissan, to enter the

    Indian market for Light Commercial Vehicles through joint ventures with Indian companies and also

    announced its policy of broad-banding of licenses, under which companies did not have to seek

    licenses for every new vehicle they wanted to manufacture. Tata Motors used this opportunity to enter

    into the LCV market by designing & developing its own LCV in a record 18 months, and launched the

    Tata 407 in 1985. It was followed up with the launch of the Tata 608 & Tata 709 in 1987. By mid-90s

    Tata Motors had beaten all competition to be the market leader in this segment.The vehicles made

    by Tata Motors were sturdier and reliable and thus better suited for the rough Indian roads. In terms

    of reach and spare parts availability also Tata Motors was way ahead of its competitors.

    This segment is broadly classified by Industry body Society of Indian Automotive Manufacturers

    (SIAM) into 2 categories - the Light Commercial Vehicle (LCV) segment (which has a load bearing

    capacity of 3.5 tons to 7.5 tons) and the Intermediate Commercial Vehicle (ICV) segment (with

    capacity of more than 7.5 tons to 12 tons). Figure 3 in the annexure gives a detailed breakup of the

    products that Tata Motors has in LCV& ICV segments.

    Though in FY 2012-13 there was a negative growth in this segment (vis--vis FY 2011-12), the

    industry has seen a CAGR of 13.2% over the last 5 years. Tata Motors is the undisputed market

    leader in the LCV segment with nearly 70% market share and has a market share of more than 42%

    in ICV segment. A snapshot of market share and volume in these segments for the last 5 years is

    given in Annexure-I (Figures 9 & 10).

    There are various growth drivers for this segment, the major ones being the increased demand

    for last mile connectivity which saw the phenomenal growth of the Tata 407 range. The

    improving conditions of Indian roads due to implementation of various Government schemes like

    PradhanMantriGraminSadakYojna (PMGSY) has led to increased sales in this segment. Focus on

    improved urban infrastructure and rapid industrialization also has been a major growth driver for this

    industry. The competition is also growing in this segment with Indian players like Eicher, M&M, Force

    Motors and global players like Daimler (Bharat Benz) entering the fray.

    The customer preferencein this segment has seen a marked shift from being a very price sensitive

    market to a more performance oriented market. Factors like payload, mileage, overloading capacity

    etc. which used to be drivers of customer preferences have given way to factors like engine

    power, reliability, cabin comfort, safety etc. Increased vehicle complexities due to opening of niche

    applications across the country are bringing in its own share of challenges. Having catered to the

    4

  • mass market for long, Tata Motors now also faced the challenge of creating a brand image of a

    premium manufacturer in the L&ICV segment. The task ahead of Tata Motors is to dominate LCV &

    ICV truck segment across all tonnage points and maintain profitability by building a premium brand

    image.

    Buses

    Tata Motors has for over fifty years, continued to redefine the ways in which people look at road

    travel in India. From building the earliest trucks that acted as goods transportation vehicles to

    manufacturing chassis for buses that virtually support the entire public transport network in the

    country, Tata Motors has always enjoyed a strong presence on Indian roads.

    Today Tata Motors is the worlds fourth largest bus manufacturer with the most complete range

    of transit vehicles that meet every need that arises in our day-to-day travel. It has continued to

    be the leader in this segment not just by setting technological benchmarks but also by adapting

    innovations effectively to suit Indian travel conditions. It manufactures a variety of premium buses

    and coaches that cater to the entire gamut of utility vehicles and applications, from luxurious inter-

    city travel options to safe transport choices for school going children. While fully built buses come in

    a wide range from 12 seaters to 67 seaters, Chassis options vary from 4 tonneGross Vehicle Weight

    (GVW) (5meter length) to 16 tonne GVW (12m length). Figure 4 gives an illustration of the various

    segments of the busmarket and products of Tata Motors in these segments. Buses are typically

    divided into four categories based on their application/usage. The customer segment for buses is

    further divided into 3 distinct categories the STUs (State Transport Units), Private operators, and

    contract operators. Figure 6 illustrates the preferences of the various customer segments mentioned

    above and describes the implications of these on OEMs as per an internal study.

    The major brands of Tata Motors are the Tata City Ride, Tata Starbus,Starbus Ultra and Tata Divo.

    Tata Motors has put in place an elaborate product strategy to counter its competitors in the market.

    The new product range has products both from Tata Motors and Marcopolo. The range of buses

    from Marcopolo is specifically benchmarked against the best products that are currently available in

    the Indian market. It can offer competition to entrenched players like Volvo &Mercedes Benz in the

    luxury segment.

    Like all other areas in the commercial vehicle industry the people transport category has also moved

    away from its oligopolistic nature. Today the industry is crowded with a number of players both

    national and international. The performance of both Tata Motors and the competition (in terms of

    vehicles sold) in the last 6 years are given in Annexure-I (Figures 11, 12, &13).

    With changingcompetitive landscape, Tata Motors will face competition from both national and

    international players in high growth inter-urban and contract segments. In the segments of urban

    and semi-urban transport, expansion of MNCs is difficult due to tender-driven and regulated nature

    of the segments. The inter-urban transport segment is where the competition is maximum due to

    the high revenue, high visibility nature of the segment. This segment is most attractive for MNCs

    as well. The contract transport segment is witnessing mixed competition with many domestic and

    international players investing in this segment.

    5

  • The luxury bus segment is also witnessing a lot of competition from European and Chinese

    manufacturers and several new entrants are expected in the near future. Volvo is currently the market

    leader in this segment and plans to continue its dominance by introducing contemporary products

    in the future. Daimler has already launched 2 and 3 axle luxury coaches in India and its future plans

    are centered on buses and luxury coach segments. Kinglong has tied up with JCBL to sell buses in

    India. It has already launched its products in the urban transport market and plans to expand in India.

    Turkish manufacturer Temsa and Japanese Hino have also lined up their entry in the near future.

    The impact on Tata Motors has been manifold, due to the entry of new competitors. Tata Motors

    earlier foray into the luxury bus segment through its Globus brand of buses was with mixed results.

    Volvo continued to be the market leader in this segment. The entry of other European players like

    Daimler and Temsawill result in products that rate high on parameters like safety, comfort, luxury

    and performance. This will pose a challenge for many Indian manufacturers. On the other hand entry

    of Chinese players like Kinglong will create pricing pressure for the existing players in the market

    offering similar features.

    To meet these challenges some domestic players have entered into collaboration with global

    manufacturers, with an intention to expand into full range manufacturing. Some of the strategic

    partnerships that have been forged are mentioned below. All these changes in the segment have

    profound implications for Tata Motors as well.

    1. Ashok Leyland-Nissan They plan to enter the light bus segment through this JV. It has

    already developed complete range of engine power points in heavy buses. This will be a

    big challenge for the existing full range players in India.

    2. Volvo-Eicher This JV is currently strong in the light bus segment, looking to expand

    to full range. They are moving from franchised to captive body building. Their value for

    money proposition is going to increase pressure on other players in the market.

    3. Isuzu-Swaraj Mazda Traditionally this JV is strong in light buses. Their JV for luxury bus

    segment has not had successes. This will remain a relevant competitor in light buses.

    4. Volvo It is the most strongly placed OEM currently. It is the market leader in the inter-

    urban luxury segment. It is introducing price competitive products specific to Indian

    market for this segment.

    5. Daimler Daimler is making investments in Pune for captive bodybuilding of urban buses.

    It plans eventual transfer of bus business under Bharat Benz. Tata Motors is not the

    leader in inter-urban luxury segment. Its new products will target matching quality and

    performance of Volvo. The potential full range offering and aggressive pricing by these

    players is going to be challenge forexisting players in India.

    There are still many challenges for the growth of the bus business in India. At a macro level, the

    growing penetration of other mass scale public transportation (like metros, mono rails etc.) are a

    threat to the bus business. Entry of foreign full range players poses a big risk for domestic incumbents

    as they look to capture a slice of the pie of bus market share. The frequently changing regulatory

    6

  • environment also poses a risk for this business. Maintaining a dominant market share in these

    market conditions remained a challenge for the bus business.

    Small Commercial Vehicles (SCV) and Pick-up segment

    Small commercial vehicle is the latest addition to the various segments of the commercial vehicle

    industry in India. This segment and its evolution is a perfect example of the Blue Ocean Strategy

    as enunciated by W. Chan Kim and Renee Mauborgne. This segment was completely dominated

    by large 3-wheeler load carriers from Bajaj, Ape, Piaggio, Force Motors etc. In 2005 Tata Motors

    launched the Tata Ace, a product which created an entirely new segment - the Mini Truck segment.

    It wiped out the large three wheeler category within a span of three years. It spawned a new segment

    which many followers tried to emulate including 3 wheeler makers such as Piaggio, Force, Mahindra

    etc. Tata Motors was able to retain its market share in this segment against competing products like

    Mahindra Maxximo, Piaggio Porter 1000 and many more.

    Tata Motors was also the pioneer of the large pickup segment in India. In the mid 1990s Tata Motors

    launched Tatamobile which later was rechristened Tata 207. The main competitor in this segment

    was Mahindra & Mahindra with its Maxx pickup. The product has subsequently seen substantial

    refinement since its launch. In 2012, Tata Motors launched a new pickup the Tata Xenon. This

    product was well received by the market with rapid increase in sales and market share in many

    geographies where Tata Motors had lower share of market. The various product categories in the

    SCV segment (cargo & passenger) are given in Annexure I (Figure 5).

    Most of the customers in these segments are first time users / individual buyers unlike the heavier

    trucks which are dominated by fleet owners. These products are mostly used for last mile delivery

    of goods. These products are tmore dependent on the consumption of goods and services and

    therefore have a lesser cyclical nature in comparison to heavier trucks. The key customer buying

    parameters for these products include - product performance, operating economics, and availability

    of vehicle financing arrangements (loans).

    The CV market is set to experience significant changes primarily with the use of hub and spoke

    model. By hub and spoke model, it is meant that the freight is generated from certain regional

    cluster which is then transported to various trucking centers or hubs spread across the country.

    These goods are furthersegregated and transported across the various spokes and finally through

    these spokes the goods are delivered to the end consumers.

    Future competition in this segment is expected from Chinese & Japanese automakers. The growth

    in this segment depends on the ease of vehicle financing - loans being available to all potential

    customers at low rate of interest. With various products commanding different spots in the market

    share ladder the challenges for every different product was unique. While for some product lines the

    challenge was to maintain the market share for others the challenge was to fight off competition and

    reach the top spot. Tata Motors being a player in almost all segments has the challenge of keeping

    competition at bay in all the segments and look to further grow at a faster rate and expand the

    market as well.

    7

  • Small Commercial Vehicle Passenger

    In last few years, India has seen a spurt in passenger transportation with improvement in road

    infrastructure, rural to urban connectivity, urbanization, industrialization, increase in disposable

    income, increase in population etc. Till July 2007, only 3 Wheelers were used in Last Mile Public

    Transport (LMPT) movement for inter & intra city movement.

    In July 2007, Tata Magic Indias first 4 wheeled commercial passenger vehicle was launched & it

    changed the whole landscape of LMPT by assuring its passengers & operator better safety, better

    comfort, better technology, higher profitability & higher status to its owner. Tata Motors has been a

    pioneer in creating and growing the small commercial 4 wheeler passenger market in India.

    LMPT industry is segmented based on a) Geography, b) Type of Usage. The segmentation as

    per geography is either for intra or intercity uses. Type of usage can be shared and non shared

    application. Tata Motors offers two products in Small Commercial Passenger Industry Tata Magic

    (seating capacity 6-7 passengers) & Tata Magic Iris (seating capacity 3-4 passengers). Tata Magic

    & Tata Magic Iris are used majorly for Shared Application (both within and outside city).Tata Motors

    has been a pioneer in creating and growing the small commercial passenger vehicle market in India.

    Between the years 2007 to 2011, Large 3 Wheeler (Seating Capacity 6 Passengers) sales dropped

    drastically as operators and passengers preferred 4 wheeler vehicles. Mahindra & Force Motors

    have significantly scaled down manufacturing of large 3 wheelers & the market is now predominantly

    for 4 wheeler vehicles. However, there was still a big opportunity available within small 3-wheeler

    diesel market space having size of approx. 2.1 Lac units per annum which was not addressed by

    large 4 wheelers. To cater to this market, Tata Motors launched Tata Magic Iris in 2011 and in just one

    and a half years of its launch Tata Iris has received good response with volumes growing quarter by

    quarter across all the states with more than 40,000 Iris successfully running on roads.

    Indian LMPT scenario is changing rapidly with improvement in road infrastructure, urbanization,

    higher disposable income, industrialization, population growth etc. resulting in increase in passenger

    travel in intra & intercity movement. 4 wheeled vehicles are being preferred by the customers

    and passengers as they provide better safety to passengers/owners over 3 Wheelers. Even state

    transport authorities are endorsing the advantage of 4 wheelers leading to increase in the share of

    4 wheelers, in a space traditionally dominated by 3 wheelers. Many 3 wheeler manufacturers have

    either launched their 4 wheelers or are planning to bring 4 wheelers as they see the transition from 3

    to 4 wheels in future as inevitable. Going forward, majority of cities/towns are expected to allow only

    clean fuels like CNG/LPG vehicles for intra-city public movement.

    Future offerings in this segment will be from existing 3 wheeler manufacturers like Piaggio which is

    coming with Ape Mini passenger version, Bajaj Auto which will bring RE60 on Quadri-Cycle norms

    (yet not approved/implemented in India), Ashok Leyland which is coming with passenger vehicle

    version on their existing DOST platform. This market also has the maximum potential of growth in

    the near future. Can Tata Motors bring in pioneering products to further expand this market from

    which the whole industry would benefit?

    8

  • Dealership Network

    Over the years Tata Motors has established the largest network of sales, services and spare parts

    centre for commercial vehicles in India. This network has over 200 dealers, more than 500 full range

    dealerships and close to 1800 touch points. One added dynamic has been the growing product

    line in small commercial vehicle business and therefore the need to increase the reach of the dealer

    network. Setting up of a full range dealer network requires a large amount of capital investment. To

    take products like the Tata Ace and Tata Ace Zip to their intended market Tata Motors has set up a

    large number of sales outlets in areas where there is no presence of full range dealerships. Over the

    years Tata Motors has been able to steadily increase the number of dealerships but in the present

    scenario there are various questions that the organisation is grappling with. With the steady increase

    in product line, product focus is slowly going down. How does Tata Motors counter this? Should

    the organisation continue adding full range dealerships or should it move on to a business unit wise

    dealership model?

    Viability of dealerships is extremely important to keep the network healthy. The company is also

    faced with the challenge of increasing the revenue per outlet which is under tremendous pressure

    with competitors playing with the price structure of product lines. The challengefacing Tata Motors is

    what would be the ideal network size and structure which will help it retain its hold over the market.

    Service network and its importance

    In the commercial vehicle industry service network plays a great role when the customer is making

    a buying decision. Tata Motors has had an initial advantage as far as the reach and spread of the

    network is concerned. But with new players with advanced infrastructure entering the market and

    local players flooding the market with low cost options Tata Motors faces a tough challenge to

    ward of competition and improve the profitability of its channel partners. Tata Motors has already

    implemented a lot of innovative schemes in Annual Maintenance Contract (AMC) and Extended

    Warranty to keep their service advantage intact. Today customers are increasingly moving towards

    a total life cost of ownership (TCO) approach while deciding to buy a vehicle. Therefore the service

    advantage will play a greater role in pre sales.

    Over the years Tata Motors has ingeniously brought in various product & process innovations that

    has helped it stay ahead of the Indian commercial vehicle market. Even after opening up of the

    market and a lot of foreign players entering the fray Tata Motors has still held on to its position as

    the market leader. In addition to the constant product innovation a lot of other initiatives have helped

    Tata Motors get ahead of competition.

    9

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  • Special Initiatives by Tata MotorsProject Neev

    Commercial Vehicle Business Unit (CVBU) has initiated and established their rural presence in a big

    way through Project Neev. Neev is currently present in the 6 states of Rajasthan, Uttar Pradesh,

    Bihar, Andhra, Maharashtra and Madhya Pradesh and has footprints in 238 districts, 1,798 tehsils,

    covering more than 150,000 villages. Approach to rural market is on the plank of self employment.

    Through a rigorous skill building exercise, local, unemployed rural youth have been inducted and

    trained to work as promoters of Tata Motors commercial vehicles, who work in their own habitations.

    This has become a successful inclusive growth program for the rural geographies. This program has

    been appreciated and recognized in various forums for innovation in rural marketing, noteworthy

    being recognition received from the Honorable Minister of Youth and Sports in the Conference of

    Ministers of States for Youth 12-13

    Value Added Services

    For close to 60 years now, Tata Motors has been a step ahead in offering new technologies, products

    and value added services (VAS). Several industry firsts have been introduced by the company. Some

    of the latest innovations on VAS are - the 4-year warranty (partnering the customer through the

    lifecycle of the product). This has been designed based on the lifecycle cost study of over 15 lakh

    Tata trucks & tippers operating all over the country, in varied terrain and loading conditions. Another

    innovation on VAS front is the new premium Triple Benefit Insurance across its range of M&HCV,

    ICV & LCV Trucks and Tippers. This is yet another first from Tata Motors in the Indian commercial

    vehicle space designed in partnership with Iffco-Tokio General Insurance Company.

    Key Account Management Program

    Tata Motors was also a pioneer in launching the Key Account Management program in commercial

    vehicle space. Even today, it is the only manufacturer in Indian CV space that has a Key Account Portal.

    Key account customers have multi-location branches and site offices which make it difficult to share

    product and service related information to their workshop managers, drivers, operations managers

    etc. The key account portal offers customers several benefits. Some of these are enumerated below:

    Customers can view resolution status of registered complaints through online tracking

    system.

    Various analysis reports are also available for making better decisions.

    Also the portal helps to be aware of customers older fleet and thus TML is aware & takes

    action for replacement with new vehicles.

    Customers can make online payment through portal for various services used in

    workshops.

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  • They also can contact various Key contact persons whose details are uploaded on the

    portal.

    Road Ahead

    Tata Motors has led the Indian commercial vehicle industry for almost 6 decades now. It is a major

    player in almost all the segments of the industry. For the organization, every market segment brings its

    own set of challenges, with its unique set of customers and competitors. For example the challenges

    faced by M&HCV segment are completely different from those faced by SCV segment. The price

    points, customer profile, customer expectations etc. are completely different in each segment. Being

    a player which has a presence in almost all the segments of commercial vehicles, Tata Motors is thus

    faced with multifarious challenges (as well as opportunities). With the incoming challenge from major

    global players the challenges have only increased for Tata Motors.

    What strategy should Tata Motors adopt to garner the best profits and market share in all segments of commercial vehicles?

    11

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  • ANNEXURE-I

    CV

    PassengerBased on no. of pax

    Rigid

    < 3.5T

    3.5 to7.5

    7.5T-16.2T

    12T-16.2T

    25-37T

    35 T

    40 T

    49 T

    TractorTrailor

    Goods

    Figure 1- Basic Vehicle Categorization for Commercial Vehicles

    Figure 2 Product Categories in Medium & Heavy Commercial Vehicles

    Rigid Truck

    LPT 1613 LPT 2518 LPT 3118

    Tractor Trailer

    LPS 3518 Prima 4028 Prima 4923 Prima 4928

    Tipper

    LPK 1613 LPK 2518 LPK 3118 Prima 3138

    12

  • Figure 3 Products categories in Light & Intermediate Commercial Vehicles

    Figure 4 Product Categories in Bus Segment

    LCV - 4 Ton

    LCV

    SFC 407

    Starbus 16-24s

    LPT 407

    Starbus 28-36s

    SK 407

    Cityride 12-20s

    LCV - 7 Ton

    ICV

    SFC 709

    Starbus 36-42s

    LPT 709

    Tata Schoolbus

    LPT 709 HEx2

    LPK 407

    Tata Schoolbus

    LCV - 9 Ton

    MCV

    LCV - 11 Ton

    SFC 909

    1512 TC

    LPT 1109

    LPK 909

    1618 TC Bus

    LPT 1109 HEx2

    LPT 909 HEx2

    Starbus 53-64s

    LPk 909

    Divo bus

    13

  • Category Kay Purchase Criteria Relative Performance

    Operator Requirements

    Acquisition Cost

    Reliability

    Resale Value

    Fuel Efficiency

    Performance

    Low cost of ownership

    Passenger Requirements

    Safety

    Ride comfort

    Convenience

    Figure 5 Product Categories in SCV Segment (Cargo & Passenger)

    Figure 6 - Customer Segments in Bus Industry, their Preferences & Implications of those on Customer Segments

    Micro Trucks 2500 kg GVW

    Mini Vans

    Micro VansTata Ace Zip

    Tata Ace

    Tata Super Ace

    Xenon Tat Magic

    Tata Magic Iris

    Tata RX pickup Tata Venture

    STU Private Operators Contract Operators

    Customer Preferences

    There are 3 distinct customer segments STUs, Private Operators and Contract Operators

    Lower Higher

    Implications

    STUs and Municipal Corporations Urban and sub-urban segment

    Tender driven purchase process

    Acquisition cost is the biggest purchase driver

    Private Operators Inter-urban segment

    Passenger comfort, safety and reliability are the key purchase drivers

    Contract Operators Higher re-sale value, loser operating

    economics (mileage, maintenance cost etc.) are the key purchase drivers

    Fleet owner catering to the premium segment also value passenger comfort, reliability and safety

    14

  • Year Tata Motors Hindustan Motors

    Ashok Leyland

    Force Motors

    Mahindra & Mahindra

    Piaggio TOTAL

    2007-08 101847 3 0 5483 44976 4945 157254

    2008-09 89150 50 0 1981 47277 9012 147470

    2009-10 121403 281 0 3678 76487 11094 212943

    2010-11 152201 312 0 6726 105588 9124 273951

    2011-12 209895 157 7593 5862 127029 10579 361115

    2012-13 254257 214 34794 3335 142796 2469 437865

    Figure 7 - No. of vehicles sold by Tata Motors and competitors in SCV Cargo Segment in last 6 Years

    Figure 9 - No. of vehicles sold by Tata Motors and competitors in LCV Trucks Segment in last 6 Years

    Figure 8 - No. of vehicles sold by Tata Motors and competitors in SCV Passenger Segment in last 6 Years

    Year Tata Motors Force Motors Mahindra & Mahindra

    TOTAL

    2007-08 11136 0 0 11136

    2008-09 28659 0 0 28659

    2009-10 48931 0 0 48931

    2010-11 51051 237 0 51288

    2011-12 60203 147 25434 85784

    2012-13 94376 11 22313 116700

    Year Tata Motors Ashok Leyland

    Mahindra & Mahindra

    Force Motors

    Eicher Swaraj Mazda

    TOTAL

    2007-08 19009 0 4830 902 3288 2610 30639

    2008-09 17078 3 3486 1757 2404 1495 26223

    2009-10 26997 0 4804 1886 3844 1802 39333

    2010-11 30693 1 5449 1416 5287 1189 44035

    2011-12 35293 0 5872 1464 6291 1348 50268

    2012-13 26654 0 4344 1294 5082 1517 38891

    15

  • Figure 11 - No. of vehicles sold by Tata Motors and competitors in LCV Buses Segment in last 6 Years

    Figure 12 - No. of vehicles sold by Tata Motors and competitors in ICV Buses Segment in last 6 Years

    Year Tata Motors Ashok Leyland

    Eicher Mahindra & Mahindra

    Force Motors

    Swaraj Mazda

    TOTAL

    2007-08 13317 616 1509 5284 5360 2234 28320

    2008-09 11789 523 1022 2613 4027 1944 21918

    2009-10 15382 812 1407 2813 5779 1835 28028

    2010-11 20706 699 2484 4785 8321 3031 40026

    2011-12 20976 398 3319 4456 11093 3189 43431

    2012-13 20499 328 4040 2315 10926 2321 40429

    Year Tata Motors Ashok Leyland

    Eicher JCBL Mahindra & Mahindra

    Swaraj Mazda

    TOTAL

    2007-08 1417 765 1317 0 0 2090 5589

    2008-09 3239 682 1225 0 0 1605 6751

    2009-10 5251 1107 1726 1 0 1821 9906

    2010-11 5684 1588 2318 0 0 3276 12866

    2011-12 6066 2487 3091 0 84 3303 15031

    2012-13 6611 3058 3253 0 79 3913 16914

    Figure 10 - No. of vehicles sold by Tata Motors and competitors in ICV Truck Segment in last 6 Years

    Year Tata Motors Ashok Leyland

    Eicher Swaraj Mazda

    TOTAL

    2007-08 19138 1774 16274 3663 40849

    2008-09 13527 1271 10587 2331 27716

    2009-10 21214 1502 17099 3864 43679

    2010-11 25489 2810 22583 4529 55411

    2011-12 32326 4169 25734 4875 67104

    2012-13 24262 6477 22910 3767 57416

    16

  • Figure 13 - No. of vehicles sold by Tata Motors and competitors in MCV Buses Segment in last 6 Years

    Figure 14 - No. of vehicles sold by Tata Motors and competitors in M&HCV Trucks in last 6 Years

    Year Tata Motors Ashok Leyland

    Eicher JCBL Swaraj Mazda

    Volvo (incl. VBIPL)

    TOTAL

    2007-08 15522 16809 487 0 0 240 33058

    2008-09 12203 15344 110 0 0 484 28141

    2009-10 16850 15298 202 178 42 607 33177

    2010-11 15014 18837 157 0 76 568 34652

    2011-12 14650 18262 856 0 95 677 34540

    2012-13 11315 15584 1371 0 18 601 28889

    Year Tata Motors

    Ashok Leyland

    AMW Eicher Volvo MB India Mahindra & Mahindra

    Swaraj Mazda

    TOTAL

    2007-08 129961 56061 3611 4392 823 206 32 0 195086

    2008-09 84705 29796 3623 1625 913 219 6 0 120887

    2009-10 111822 39228 3792 2119 1006 215 0 0 158182

    2010-11 145943 59863 6792 5165 1000 103 843 2 219711

    2011-12 153972 56345 10021 7719 595 85 3490 3 232230

    2012-13 101194 45437 6533 7517 616 0 2977 21 164295

    17