Tata Motors will spend more than half of its Rs. 3,000 crore annual capital expenditure outlay on sprucing up its passenger car business as a large portion of its manufacturing plants are lying idle.
Low sales and tepid demand affected passenger car business of Tata Motors, prompting the company to invest more in product development, enter new segments and bring out product refreshes regularly.
Investment of more than Rs. 1,500 crore for at least next four years - more than Rs. 6,000 crore till 2016-17 - in the car business, which currently accounts for less than a third of the domestic revenue of Tata Motors.
"We are at less than 50% in terms of overall capacity utilisation in the passenger car business which is also hurting the overall performance," said C Ramakrishnan, chief financial officer, Tata Motors.
"Between the commercial vehicles and passenger cars, I would think slightly more than half of capital spend would be for passenger cars and for commercial vehicles it will be slightly less," Ramakrishnan told analysts in a recent interaction.
"I think we need to get our act better in terms of both product refreshes, periodic excitement in the market in terms of newer introductions and better execution capability both in quality as well as in customer connect," he said.
Ramakrishnan also said that several initiatives internally within the company are underway. "We will take servicing, quality, etc. to much higher levels than we have done in the past. We have identified the actions, the team is in place. Hopefully we should be able to demonstrate through actual results as we go forward," he said.
Tata Motors registered a modest 1% year-on-year rise in its car sales at 151,761 units during the April-October period, with a marketshare of 12.3%. However, October sales dropped 16% at 21,119 units. A silver lining in the cloud is the steady growth of Nano, posting a 31% rise in sales at 43,627 this financial year so far.
"Whether it is the Nano or other models, we have seen some modest improvement in volumes as well as the market share. But I think they have a long way to go," he said.