Tata Motors confident of sustaining growth amid supply chain concerns

Even as shortage of semiconductors, steel prices and muted macroeconomic indicators pose a challenge for the auto industry as it recovers from the impact of COVID-19, Tata Motors said growth momentum in its passenger vehicles was sustainable, as it was driven by latent demand and its ‘new forever’ range of products, a senior company executive said.

Speaking to The Hindu, Shailesh Chandra, president, Passenger Vehicles Business Unit, Tata Motors, said that he expected the passenger vehicle segment to close the current fiscal year with a decline of about 5%. This, he said, was an improvement given an earlier expectation of a 20% decline. For the coming financial year he expects a double-digit growth for the entire segment.

The company on Monday unveiled the all-new Safari SUV with introductory prices ranging from ₹14.69 lakh to ₹21.45 lakh.

Steep ramp-up

Compared with the 12% decline in PVs for the industry year-to date, Tata Motors has seen a 46% growth. The backbone of the success is the company’s ‘new forever’ range of models, he added. “… but we have taken certain very transformative steps in the front-end as well as some very stupendous effort on the back-end also, which has led to a very steep ramp up from sales of 11,000 units per month to nearly 27,000 units per month.”

“It is easy for us to sustain this because there is still a gap in terms of what is the booking rate that we are getting and what we are able to supply even with the five products that we have. Now, on top of that we are adding Safari and we plan to bring Hornbill in the current calendar year. So therefore, it is not only about sustaining this growth; we are actually very confident of growing from where we are,” Mr. Chandra said.

He noted that the industry perspective had been seeing recovery since Q2 over the previous financial year which was a low base year. “… the silver lining is that the last five-six months have been double-digit growth for the industry. Also, typically after Diwali, there is a 35% drop in the demand which has not happened this year…,” he said.

Mr Chandra added that this showed there was sustenance of demand which the supply side is not able to meet and therefore there is a lot of latent demand remaining still.

“…Given that the industry is at possibly the lowest level of inventory levels at channel partners and there is a need to replenish that, is showing that the demand is going to sustain for a while. Of course, it remains uncertain because the macroindicators are not that great. When you talk in terms of the whole economy, when you talk about the fuel prices, It’s not that good, but still it is sustaining because of a few factors,” he said.

Mr. Chandra said that while the shortage of semiconductor as well as steel prices were going to be a ‘real issue’, currently there was ‘no reason to panic’.

Shortage restricts potential

“We are pretty much in a similar situation as the industry from a supply side perspective…this is going to be a challenge for us also. There are a series of actions that we have taken to overcome that…and so far we have been able to manage. It’s an uncertain situation but there’s nothing to panic as of now,” he said, adding that this definitely restricted the entire industry from fully unleashing the potential in the demand that they were currently seeing.

He said the firm’s product strategy would depend on which segments that showed propensity for growing faster than the rest of the industry, and which ones were going to balloon in size going forward…within those segments we analyse the customer segment and the price points and see what is the best value proposition we can bring rather than showing a me-too product.”

“There is a significant growth one is seeing in the SUVs. From a 9% share of SUVs about 10 years agp, it is now 33%. So it is gaining importance, there is a greater disposable income that you’re seeing…people are upgrading also from a lower segment to the higher segment and a big opportunity that one is seeing in the mid-size SUV space. And from our perspective it was important for us to tap this growth and be in that sweet spot where the future is headed towards,” he said.

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