Last week, addressing shareholders at the annual general meeting of Tata Motors here, Ratan Tata said: “I have a great respect for what Mahindra & Mahindra (M&M) has been able to do. I also have a certain degree of sadness, and shame, that we have let that happen”.
What he was referring to was M&M having recently cruised past Tata in the first quarter of this financial year, to grab the third spot on the list of India's biggest passenger vehicle makers in domestic sales, trailing Maruti Suzuki and Hyundai. M&M sold 61,504 units versus Tata Motors’ 60,405 in the quarter.
The race for the number three spot is far from over, though. Tata, India's biggest automotive company, regained its number three slot last month, as increased deliveries of the Indica, Indigo and utility vehicles (UV) helped push overall volumes. But, it is M&M that has gained the momentum, as well as the psychological edge, over its rival: A crestfallen Tata is proof.
| In top gear |
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A few years ago, Tata was the domestic car maker heralding a new age for Indian automobile companies by bringing path-breaking concepts, such as the Nano. While the latter has not exactly been the success it once promised to be, today it is Anand Mahindra, the 54-year-old commander of the Mahindra empire, and not Ratan Tata, who is seen as a visionary.
Back in 1997, Anand Mahindra gave the go-ahead for developing an indigenous sports utility vehicle. The initiative was dubbed ‘Project Scorpio’. It was a big, ambitious leap for a company which largely produced tractors. The UV segment penetration in India was less than one in a 1,000, making the project an epic challenge. Launched in 2002, at reportedly a tenth the development cost of what a foreign auto major would have spent, the Scorpio has become the largest-selling sport utility vehicle (SUV) in the country. M&M today boasts an all-diesel line-up — the Bolero, Scorpio, Xylo and XUV 500 — making it the largest UV producer in the country.
Meanwhile, Tata’s less-than sparkling success with the Nano is a gloomy culmination of a decade of misses. Tata Motors failed to cash in on the Safari SUV, despite it being launched in the market four years before the Scorpio. Its other product, the Sumo, became the preferred choice of taxi operators, failing to position itself as a personal vehicle, like the Xylo. Further, the Aria, a premium crossover, did not live up to the volumes expected from it.
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Killer products
Positioning itself for a killer blow, M&M is about to launch the mini Xylo, a compact version of the multi-seater family vehicle Xylo, launched in early 2009. While the company has not disclosed details of the pricing, market reports say the diesel-run mini multi-purpose vehicle (MPV) will be priced below Rs 5,00,000, making it at least 30 per cent cheaper than its older, bigger sibling. This has been possible because of engineering ingenuity. The car is less than four metres in length, allowing it to qualify for the lowest slab of excise duty charged on passenger vehicles (12 per cent), which is less than half of that levied on the current Xylo (27 per cent). Despite the length of a large hatchback, it will be able to accommodate seven people.
"Considering the Maruti Ertiga and the XUV 500 generate sales (in units) upwards of 5,500 and 4,000 a month, respectively, one can expect the mini Xylo to produce at least 3,500-4000 units a month. It’s a new segment with no competition, except for the Premier Rio SUV", says Ajay Sethiya, auto analyst, Centrum Broking.
| PEDAL TO THE METAL Mahindra saw a huge increase in sales this year, thanks to its XUV 500 | |||
| Domestic sales (of units for first four months of FY13) | |||
| Company | Apr-Jul' 11 | Apr-Jul '12 | Growth % |
| Mahindra | 65,526 | 83,515 | 27.45 |
| Maruti | 317,187 | 334,288 | 5.39 |
| Tata Motors | 82,300 | 86,679 | 5.32 |
| Hyundai | 118,803 | 125,115 | 5.31 |
| Source: Companies | |||
M&M is also gearing up to rake in additional volumes from the compact Verito scheduled for launch in the last quarter of the current financial year. This sedan will similarly qualify as a compact car, designed to measure less than four metres in length, which means its diesel variant could be priced under Rs 5 lakh. Sources say M&M had been working on small petrol engines at its research and development centre for the compact Verito.
The mini Verito will take the battle straight to Tata Motors' Indigo CS sedan, the first compact sedan ever launched in India. Entering the fray, car market leader Maruti Suzuki recently launched the compact DZire sedan, with a cheaper price tag than the earlier DZire.
Late last month, M&M also introduced a refreshed version of the Verito in the domestic market, targeting better volumes from the sedan formerly known as Logan.
Pravin Shah, chief executive (automotive sector), M&M, says, "We are on our way to getting that product ready. Surely, the mini Xylo will expand the Xylo family and the platform. We are hoping to have that kind of excitement for the mini Verito, too."
Fightback
Tata Motors is not likely to take this lying down. One of its longest-serving models, Safari, is getting a major face-lift in styling and other engineering aspects inspired from Land Rover. The new model will be re-badged Safari Storme. Scheduled for a launch in coming months, it is expected to be lighter and more spacious.
Tata Motors will also launch a stripped-down version of the Aria crossover that will be substantially cheaper than the current one, priced at Rs 12.13 lakh for the BSIV version (ex-showroom, Mumbai). The Aria has failed to churn sizeable sales figures for the company, as it and the personal pickup vehicle, Xenon, posted sales of only 168 units in the first quarter, a fall of 76 per cent as against the 708 units sold in the same quarter a year ago.
However, the company has a secret weapon that could reverse its domestic fortunes, the diesel-driven Nano. However, sources say it won’t be launched before the end of the current financial year. The company did not respond to queries from Business Standard. The petrol-driven car, Nano, clocking sales of 5,500-6,000 units a month, makes up 20-30 per cent of Tata Motors total passenger vehicle sales. Diesel-driven vehicles, led by the Indica hatchback, constitute 70 per cent.
Though the company witnessed a jump in sales volumes in July, it has decided to go ahead with a four-day plant shutdown starting August 1 at its Pune passenger vehicle facility. This could mean a lower dispatch of cars and SUVs for the current month, assuming Tata Motors does not ramp up production to make up for the loss.
It’s not that M&M does not have its share of failures. The Logan sedan, a product of a joint venture (JV) with Renault, was a disaster. An earlier JV with Ford to produce the Escort didn’t exactly set the world on fire. But that’s history; today, M&M is the hottest car maker in town, having entered the big league in just ten years of making its first real debut. Not bad for a company known for making tractors.