Covid impact: Tata Motors on a mission to save cash, link output to demand

Mumbai: Tata Motors is conserving cash and tightly coupling its production plans to demand to help prevent an inventory build-up, and is banking on the eventual carve-out of its passenger car division into a unit to make the business more competitive, CEO Guenter Butschek told ET in an exclusive interview from Austria.The German CEO of the Tata Group’s domestic automotive business has been leading the company from his Austrian base through the lockdown. Butschek said that the operating location of an executive doesn’t matter as much these days, with the company focused on executing the “transformation” roadmap set out four years ago to turn around the business.“The transformation…which started a few years back... is enabling the organisation to be better prepared to deal with the crisis. The subsidiarisation of our passenger car business will enable it to have greater independence and access to new-age technology, capital and alliances to be agile,” Butschek said. “We are taking stringent steps to conserve cash and are shifting from ‘build to stock’ to ‘make to order’.”Butschek took charge of Tata Motors in February 2016.“Our last year’s shift of paradigm from wholesale to retail is now the need of the hour for a successful industry revival — production needs to follow retail as building stock in this stressed cash environment is not the right option,” Butschek said.Analysts believe the company needs to concentrate on the commercial vehicle business. “The company will not be able to maximise the potential valuation in the current context. So it’s better to look for an alliance partner and stabilise operations and market-share,” said Mahantesh Sabarad, head of retail research, SBICap Securities, in reference to the proposed spin-off of the car unit.The CEO said that the turnaround plan is still work in progress. In FY17, sales fell marginally but net profits declined nearly 35%. Although revenues rose 8% and 4% in FY18 and FY19, respectively, the company reported a record loss of ₹28,826 crore during FY19. In FY20, revenue fell 13% over FY19 and the company posted a loss of ₹12,071 crore. The company’s market capitalization has declined from ₹88,608 crore at the beginning of FY20 to ₹34,284 crore on Wednesday.He scotched speculation that he is unlikely to stay on for the next term after the current mandate ends in February next year.Butschek said the company is working on ways to drive market share through convenient and affordable pricing models.“On the entire range of cars and SUVs, Tata Motors is offering 100% on-road funding. Customers can also take advantage from the long tenure EMI schemes (up to eight years), thus lowering the amount of their monthly EMI payment,” Butschek said.In the commercial vehicles business, Tata Motors needs to enhance its financing incentives and return to its dominant market-share position through a coherent product strategy, Sabarad said.

from Economic Times https://ift.tt/2YcU0JD