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Sunday, September 13, 2015

Why Tata Motors has got it all wrong?


To begin with, here is a disclaimer I am not an auto expert, not that I think anybody is. Experts, in my opinion, are those who have to make a little less effort to take away your money. I am just a wannabe investor who due to noise (in news, of course) got interested in Tata Motors.

I made an investment into Tata Motors DVR because of two things - their strategy of launching two cars every year till 2020 and opportunities with Jaguar to make a significant foray into Indian luxury car markets. While latter might be offset with slowdown in China, I assume that at least one of their launches will dominate the market. Why? I dont know, I am just assuming.

Lately, my skeptical mind has developed a concern that there is a serious flaw in Tata Motors strategy for their passenger vehicles. Tata Motors is a typical case where brand got diluted because product got associated with a niche market rendering it unwanted for majority of their target customers.

I still remember my school days when a Tata Indica would stop on a red light and people would run after it thinking it to be a taxi. The owner of the private vehicle would have a hard time explaining the budding passengers that its his car and would steer away swearing never to own a Tata car again.

While taxi owners continued to prefer Tata Indica, Indigo and Sumo for their ruggedness and longevity, individuals moved away to Maruti and Hyundai. Whatever was left was taken away by majestic Nano. I still believe that Nano should have been launched by CSR wing of Tata Sons and not by Tata Motors.

Well, with so many disasters in past, its very understandable that Tata Motors has been trying to resurrect itself by moving away from the tag of Taxi. That is where, I believe, Tata Motors has got it all wrong.

First, they are trying to compete in a space which is well captured by Maruti & Hyundai and Indians dont seem to be in a mood of giving up on them yet (I see more Ciaz than Zest and Bolt together on roads). Anybody looking for a change has many options and Tata Motors is definitely not among the preferred in those options.

Second, Indias automobile landscape has changed. From queuing up (one over the other not one after the other) at a red light for a taxi, people have moved to billion dollar apps. Now, even a limo could be taxi (or cab, as its called now). So, being branded as cab is no more a taboo. In fact, passenger vehicles as cabs are at an inflection point with Anand Mahindra also recognizing the potential threat it poses on the individual consumption of cars.

Tata Motors could have been the core beneficiary of this transformation if it would have focused on preserving its image as preferred Taxi. On the contrary, I see many Maruti cars being used as cab. In their zeal of moving away from Taxi image, Tata Motors has destroyed their moat in passenger vehicles.

Lets load our guns of probability and shoot a scenario where Tata Motors strategists are loser who accepted their defeat in the passenger vehicle arena and have decided just to focus on Taxi as their target market. With advent of radio cabs, they could have approached Ola Cabs for an exclusive partnership. The deal would be that anybody who wants to purchase a new car to be used as a cab can buy it from Ola preferred Tata Motors at a 10% discount with a minimum commitment of 3 years with Ola.

It would have been a win-win situation for all. For buyer, it doesnt matter if its Maruti or Tata, if hes using it for commercial purpose. What matters is price which looks attractive with Tata (discounts, that too exclusive, make people go insane). For Ola cabs, which are spending billions to increase its market share, a three year commitment from cab owners would be a Tathastu moment. For Tata Motors, their loser strategists would have become the game changers boasting about their far farsightedness.

Phew! Imagination can tire you. Time for me to grab a cup of coffee.

Comment if you liked it. Comment if you hated it.. Damn you if you ignore it :)

5 comments:

  1. Hi Somendra..nice try but I believe some facts should be put in place for assumptions as well :)...however my take on this is that they are a trusted brand and can make their mark in this industry as well. Problem acc to me is the right placement of their product acc to the right segment of market. Also Ratan Tata mentioned that he has wrongly marketed NANO as cheapest car thereby declining its sales...

    njoi life

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