The sand is slipping through the fingers for Tata Motors, which is struggling to arrest its plunging sales graph.
The Tata group company has pumped more than Rs. 2,000 crore into product development this year, spent aggressively on marketing, and offered discounts to clear inventory. It opened 240 exclusive outlets to sell the Nano and 40 outlets for just utility vehicles. But sales continue to slide, with the third quarter turning particularly bad.
In the first half of 2012-13, the company showed a moderate 5% growth in car and utility vehicle sales. But then it took an inventory correction, leading to 36% drop in sales in the third quarter. Nano was down 45% while the compact car category, comprising the Indica, Vista and Indigo CS, saw a 40% dip.
After the new MD, Karl Slym, took charge, Tata Motors has reorganised its passenger car division with a target of becoming India's number two player by 2020. It began by refreshing the Manza, Vista, Aria and Safari. But things just turned tougher, with market share slumping to 10% and a half of the production capacity unutilised.
Chief financial officer C Ramakrishnan said in a recent analyst interaction: "Not very long ago we went up to 16-17%, I don't see why we cannot reach there or go beyond."
"Tata Motors has set up a road map under its new MD to revive passenger vehicle business," said Rikesh Parikh vice-president, Motilal Oswal Securities. "While product portfolio changes would need at least two years, it plans to improve other aspects such as quality, sales and service over the next two years."