Tata Motors looks to ace last-mile delivery with a sub-600 kg SCV

The upcoming sub-600 kg four-wheeler small commercial vehicle (SCV) is also likely to take on three-wheeler dominance

Tata Motors, India’s largest commercial vehicle manufacturer, is looking to launch a first-of-its-kind sub-600 kg small commercial vehicle, aiming to cater to the growing demand for efficient last-mile delivery solutions, an area currently witnessing a surge in interest from e-commerce giants. This new entrant is set to be positioned just below the marquee Tata Ace, which is popular across the country as “Chota Haathi”.

Girish Wagh, executive director at Tata Motors and brain behind the Tata Ace that helped revolutionise the last-mile delivery in the Indian market since its launch in 2005, revealed the company’s strategic plans in an interview with Business Standard. "In e-commerce, hub-to-hub transport is handled by 19-tonne medium commercial vehicles, and some even use 28-tonne three-axle trucks. For the last mile, however, smaller vehicles are the key,” Wagh explained. “We have decided to leverage this demand with a four-wheeler vehicle (diverging from the prevalent three-wheeler models currently dominating the market), featuring a payload capacity under 600 kg.”

 

Tata Motors’ current offerings begin with the Tata Ace at 600 kg, but there’s untapped potential in the segment below that, said Wagh, adding that “We are exploring what we can do especially with the growth of three-wheelers CVs and specifically due to electrification. There are some interesting possibilities in the space below ACE (sub-600 kg).”

Tata Motors: SCV goliath
Company's report card for the SCV segment

	Sales (units)	Y-o-Y growth (in %)	Market share (in %)
Q1FY24	36,390	-21	35.6
Q2FY24	41,704	-7	33
Q3FY24	38,964	-10	31
Q4FY24	42,190	-10	33
FY24	159,248	-12	33.1
Q1FY25	34,241	-6	NA

Source: Company press releases

Though there is a “need gap” in sub-600 kg space, the Tata Motors’ executive said, “We won’t bring in a three-wheeler here, because a four-wheeler is safer and it also is appropriate for our brand.”

Tata Motors did not share any timeline for the launch of this new vehicle, which is still in the “planning and development” phase.

Tata Ace has been a transformative force since its debut, helping reshape the last-mile delivery landscape in India; it has become the go-to choice for over 2.3 million entrepreneurs, and largest commercial vehicle brand in the country.

In 2001, a then 29-year-old Wagh conceived the Tata Ace to challenge the sub-2-tonne market, then dominated by three-wheelers from Bajaj Auto, Mahindra and Mahindra, and Piaggio. Now, Tata Motors plans to confront the dominance of three-wheelers once again with its upcoming sub-600 kg four-wheeler small commercial vehicle (SCV).

“Three-wheelers stagnated during the BS IV phase, leading to a shift towards four-wheelers like the Ace,” Wagh noted. But during the transition from BS IV to BS VI emissions standards, the Ace saw a 30 per cent price increase, compared to only 15 per cent for three-wheelers, and this prompted some buyers to revert to three-wheelers, he said.

As a result of the price increase, the Ace diesel, which once constituted 70-75 per cent of Tata Motors’ portfolio during the BS IV era, experienced a decline in volumes. "We proactively introduced ACE gasoline, CNG, and now the EV, but these didn't fully compensate for the lost volumes,” Wagh admitted.

In response, Tata Motors is crafting a comprehensive comeback strategy for its SCV portfolio, employing a multi-pronged approach. The company's market share in the SCV segment dropped from 35.6 per cent in Q1FY24 to 33 per cent in Q4FY24, prompting a renewed focus on addressing key challenges, such as improving access to finance for first-time buyers.

Besides the BS VI price hike, the Covid-19 pandemic led to a surge in non-performing assets (NPAs) within the mini-truck segment, causing financiers to become cautious, noted Wagh. “Even our in-house financing arm, Tata Motors Finance, which previously accounted for 35-40 per cent of our small vehicle financing portfolio, fell to 15-16 per cent,” Wagh explained. “We're working with financiers to address this issue and drive market growth. This is a major debottlenecking that we have to do, and that will lead to growth in volumes.”

To enhance customer engagement, Tata Motors has launched a project focused on front-end transformation. By analysing customer needs and pain points, the company has developed strategies to tailor products for specific segments and end-use applications, shifting its sales focus from B2B to B2C.

Additionally, Tata Motors is extending its network by incorporating and training mechanics, ensuring a better service experience for customers. In the pre-BS VI era, vehicles were easy to repair even by roadside mechanics, but technology changes have altered that. “We've started a pilot programme in Maharashtra. We are making them (mechanics) part of our extended network so that availability of servicing becomes easier for our customer," Wagh shared. This initiative aims to bring Tata Motors closer to SCV buyers by enhancing the overall service experience.