India’s Tata Gaining Traction After 3-Year Slump

MUMBAI – Following three disastrous years, Tata is trying to reinvent itself with a new emphasis on investment, quality and market appeal.

India’s No.3 automaker saw its sales plummet 104.8% from 667,626 in 2012 to 325,847 in 2014, according to WardsAuto data. Tata’s brand image has been battered by its lingering reputation for poor quality and reliability

By current Tata standards, the Zest compact sedan, powered by a 1.2L Revotron gasoline engine or 1.3L Quadrajet diesel, and the Bolt hatchback, offering turbocharged 1.2L gasoline or 1.3L diesel powerplants, may be well-engineered and better-built. But they are saddled with the Indica’s legacy of poor quality and mediocre performance.

The newly launched Zest and its hatchback version, the Bolt, feature new-age styling, modern interiors and a pleasant drive. They come with promise and hope, but Tata also has work to do in other areas such as quality.

A panel led by Tim Leverton, president-advanced product engineering, scrutinized the quality of each of 600 parts supplied by 300 suppliers before being used in the latest-model Bolt. Defective or poor-quality parts were returned.

Currently in development are a new hatchback and a new compact sedan, both smaller and slightly less expensive than the Zest and Bolt. Codenamed Kite-4 hatch and and Kite-5 compact sedan, they are designed on the new X1 platform evolved from the Indica’s XO platform. They will have an all-new suspension system and a 1.0L turbodiesel and 1.2L gasoline engine promising higher fuel efficiency and improved performance.

Tata also is developing two brand new platforms. The Raptor, designed for the new Sumo and other MPVs, will break away from traditional ladder-and-frame construction in favor of a modern unibody architecture.

Due in 2018 or 2019 is an advanced modular platform with such flexibility that Tata may make it a standard platform for its entire range. It can support diesel or gasoline vehicles; small, medium or large cars from hatchbacks to sedans; and utilities from MPVs to SUVs.

Tata plans to launch 12 vehicles over the next five years: four cars, five SUVs and three MPVs. Besides the K-series cars, there will be an SUV powered by a 1.5L diesel engine; a facelifted Safari with a new engine; the Eagle, a premium CUV using Tata’s existing 2.2L Dicor engine; and a compact SUV codenamed Q501 to be developed jointly with Land Rover and based on the Tata subsidiary’s Discovery Sport.

All these projects are part of the HorizoNext Plan that includes Tata’s Jaguar Land Rover subsidiary.

Committing Billions to R&D

According to a statement submitted to the Bombay Stock Exchange as part of a Rights Issue stock offering of Rs75 billion ($1.2 billion), both Tata and JLR plan to increase capital spending Rs100 billion ($1.6 billion) every year for the next two to three years, for combined new investment of about Rs350 billion ($5.6 billion).

Tata and JLR are doubling their R&D expenditures over this period, Tata from 3.3% of sales to 6.3% and JLR from 6.6% to 12%. The Fitch rating agency has given Tata a “stable” rating in view of its continuously strengthening financial position.

The automaker also has rebuilt its management since the sudden death last year of Karl Slym as managing director last year. A key move was luring Mayank Pareek away from Maruti Suzuki, where he served as former chief operating officer-marketing and sales, and naming him president of Tata’s passenger-vehicle business unit. He also will be involved in product planning as a member of the automaker’s corporate steering committee.

Pareek, who led Maruti’s push into smaller markets in the country’s interior, plans to enlarge Tata’s 460-outlet dealer network to more than 1,500 in the next three years.

“In the rural areas we want to go to the customer,” he says. “We don’t expect him to come to us – we wish to go to him.”

From 2008 to 2013 Maruti sales jumped sixfold at 1,514 outlets in 1,193 cities. Hyundai, India’s No.2 automaker, has dealers in 620 communities.

Leverton, meanwhile, aims to make Tata a top-rank technology and engineering organisation, saying, “Tata Motors cannot carry on making the same kind of cars.”

He has modernized the automaker’s laboratories and is able to draw on JLR’s expertise in re-engineering processes, model redesign and segment design features.

Leverton wants at least half of Tata vehicles to have automatic manual transmission by 2020: “It is fuel-efficient and is a good fit for the customer demand here.”

Sales of the recently launched Zest and Bolt provide some evidence of the transformation at Tata. Deliveries in December were almost double the industrywide rate.