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Tata Motors says it is trying to redefine passenger car customers’ experience and has hastened launches, is refurbishing its dealership and expanding network. Will the new strategy deliver? President Mayank Pareek explains to Swaraj Baggonkar and Krishna Kant. Excerpts:
How has the first quarter been?
If I take 2005-2010, the Indian car industry grew at a compound annual growth rate (CAGR) of 12.3 per cent. From 2010-2015 it grew 6.4 per cent, which is half. Interestingly, from 2011-15 it grew at a CAGR of only two per cent. One can track it with the fuel price movement. First time, the petrol price went up sharply but diesel was still being subsidised. In 2012, the diesel price went up and after that the market fizzled out. In the first quarter, the industry grew four to five per cent and we grew 29 per cent. One good news is that the monsoon has been decent. The second half should be good and I expect the industry to grow six to seven per cent in FY16 and we should grow in double digits.
Does it worry you that rural demand is coming down?
Car penetration in the rural region is only two to three per 1,000 households, so there is a huge opportunity. It is a myth that rural means poverty. Every tenth rural household has enough purchasing power to afford a car. Rural does not mean farmers alone. My data says only 35 per cent of customers who buy cars there are farmers.
How much of your sales comes from rural areas? What will be the ideal level?
About 20 per cent but we need to have more. We need to have at least twice than what we have. It is only limited by our ability to penetrate more.
How has been the response to the Zest, Bolt and Nano?
We targeted the Zest and Bolt for the individual customer. Prior to that, we largely sold products to fleet customers. The Bolt and Zest are not sold to fleet operators even if it means losing sales. We are getting young customers who were never our target before. About 60 per cent of our customers opted for a petrol engine. The automated manual transmission has been a huge pull, with 22 per cent of Zest buyers and 40 per cent of Nano buyers opting for it.
You are a value for money brand but are also trying to be an upmarket brand. How do you deal with it?
The first thing would be products.
You will increasingly start seeing our products. None of our products are the cheapest in the segment anymore. But our products still offer the best value for money.
What efforts are you taking to retain the customer?
We are trying to redefine the service landscape. We want to come out with new formats such as mobile servicing. Creating a brick-and-mortar structure is expensive and not viable.
If a customer has to travel 100 kilometres to get her car serviced, she won’t be interested in the brand. Mobile servicing is low cost and will provide door-step service.
But the cost of such a model would be high?
No. A typical brick-and-mortar workshop costs Rs 18 lakh per bay. In comparison, a mobile workshop costs Rs 6 lakh, good enough to do 95 per cent of the work. The payback time is only six months for this format. It can also do a dry wash, crucial in villages where water is not freely available. We have started service-on-wheels in Bengaluru and Delhi on a pilot basis. Based on the experience we wil have a national roll out.
How has the first quarter been?
If I take 2005-2010, the Indian car industry grew at a compound annual growth rate (CAGR) of 12.3 per cent. From 2010-2015 it grew 6.4 per cent, which is half. Interestingly, from 2011-15 it grew at a CAGR of only two per cent. One can track it with the fuel price movement. First time, the petrol price went up sharply but diesel was still being subsidised. In 2012, the diesel price went up and after that the market fizzled out. In the first quarter, the industry grew four to five per cent and we grew 29 per cent. One good news is that the monsoon has been decent. The second half should be good and I expect the industry to grow six to seven per cent in FY16 and we should grow in double digits.
Does it worry you that rural demand is coming down?
Car penetration in the rural region is only two to three per 1,000 households, so there is a huge opportunity. It is a myth that rural means poverty. Every tenth rural household has enough purchasing power to afford a car. Rural does not mean farmers alone. My data says only 35 per cent of customers who buy cars there are farmers.
How much of your sales comes from rural areas? What will be the ideal level?
About 20 per cent but we need to have more. We need to have at least twice than what we have. It is only limited by our ability to penetrate more.
How has been the response to the Zest, Bolt and Nano?
We targeted the Zest and Bolt for the individual customer. Prior to that, we largely sold products to fleet customers. The Bolt and Zest are not sold to fleet operators even if it means losing sales. We are getting young customers who were never our target before. About 60 per cent of our customers opted for a petrol engine. The automated manual transmission has been a huge pull, with 22 per cent of Zest buyers and 40 per cent of Nano buyers opting for it.
You are a value for money brand but are also trying to be an upmarket brand. How do you deal with it?
The first thing would be products.
You will increasingly start seeing our products. None of our products are the cheapest in the segment anymore. But our products still offer the best value for money.
What efforts are you taking to retain the customer?
We are trying to redefine the service landscape. We want to come out with new formats such as mobile servicing. Creating a brick-and-mortar structure is expensive and not viable.
If a customer has to travel 100 kilometres to get her car serviced, she won’t be interested in the brand. Mobile servicing is low cost and will provide door-step service.
But the cost of such a model would be high?
No. A typical brick-and-mortar workshop costs Rs 18 lakh per bay. In comparison, a mobile workshop costs Rs 6 lakh, good enough to do 95 per cent of the work. The payback time is only six months for this format. It can also do a dry wash, crucial in villages where water is not freely available. We have started service-on-wheels in Bengaluru and Delhi on a pilot basis. Based on the experience we wil have a national roll out.
