Tata Motors, M&M tackle foreign rivals with own strategies

  • Jul 22, 2013
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At a time when growth is sluggish, homegrown giants Tata Motors and Mahindra & Mahindra devise their own strategies to counter the onslaught from foreign competition

Mahindra Bolero


In 2000, Mahindra & Mahindra (M&M) launched the Bolero, a utility vehicle (UV) that had all the attributes the auto and tractor maker swears by: ruggedness, few frills, no-nonsense performance and an honest price tag. Years later came another winner, a more sophisticated UV that could actually be called an SUV — the Scorpio. And more recently Mahindra's UV evolution entered another new phase when the XUV500 hit the streets.


M&M chairman Anand Mahindra fondly remembers the Bolero as "the first successful brand we made". And then he lets on that he and his top team had periodically "planned the Bolero's demise. But no matter how hard we tried, the brand kept going. Once a brand is successful, it calls the shots."


In 2012-13, Bolero sales grew at 15 per cent and accounted for 36 per cent of M&M's total UV sales. Today, M&M has a battery of UV brands — from the Bolero in the mass market to the Rexton, the premium brand of Korean SUV maker Ssangyong that it had acquired a couple of years ago. In many ways, M&M created the UV category, and that journey began way back in the '40s when it began assembling completely knocked-down (CKD) units of the Jeep.


UVs are a rage today. Prefixed by an S or an M or an X or even an L (Maruti calls the Ertiga a life utility vehicle), a clutch of competitors — most of them pure hatchback and sedan makers till recently — has invaded the Mahindra turf. Renault's Duster, Ford's EcoSport — with over 30,000 bookings in 17 days — are driving into M&M territory; and everybody from Volkswagen and Nissan to General Motors and Toyota is lining up UVs for an Indian debut in the next 12 months.

Tata Nano

The heat is on, and it is taking its toll. M&M's share of the UV pie has slipped from 55.59 per cent in 2011-12 to 45.98 per cent in the first quarter of 2013-14. Cut to India's largest automaker, the Rs 1,88,818-crore Tata Motors, which is facing a similar predicament of eroding market share in its core area within passenger vehicles (in commercial vehicles too — the business it started with — the competition has intensified).


In the late '90s, Tata launched India's first locally developed car, the Indica, thereby carving its space in the entry-level market. Today, that affordable segment is choc-a-bloc with global carmakers selling lower-cost cars with superior features and styling, in the process crowding out Tata. The Nano in the ultra-low cost segment too hasn't been able to deliver. Result? Tata Motors' share in the Indian passenger vehicle business has almost halved, from 16.44 per cent in 2006-07 to 8.67 per cent today, according to Frost & Sullivan, a consultancy.


Society of Indian Automobile Manufacturers (SIAM) data show that between April and June this year, sales dropped by 30 per cent. And, for good measure, last year Tata Motors lost its No. 3 position in the Indian passenger vehicles market to M&M, prompting former chairman Ratan Tata to declare at Tata Motors's AGM that while he has "great respect" for M&M, "I also have a certain degree of sadness and shame that we have let this happen."

Jaguar at 2012 Delhi Auto Expo

The Next Phase

But this isn't a story about a rivalry between two of India's largest automakers. Rather, it's the tale of how these homegrown giants are facing the biggest onslaught ever from foreign competition — at a time when growth is sluggish — and how they're countering it with audacious growth strategies of their own.


It's also a tale of how M&M and Tata Motors are reacting to competition at a time when segments are blurring — what was premium yesterday will be affordable tomorrow, and what was a pure SUV or a pure sedan yesterday is becoming something in between, or as the industry calls it, a crossover.


It's also a tale of how global acquisitions will play a critical role — Jaguar Land Rover ( JLR) for Tata Motors and Ssangyong for M&M, albeit in very different ways — in ensuring that these local carmakers stay relevant in the long run. "Virtually every carmaker in the world is looking seriously at India, and the competitive intensity is surging. It will be interesting to watch how the Indian carmakers stack up against the MNCs," says Mohit Arora, executive director (Asia-Pacific), JD Power, a market research firm. They'll stack up very differently, for sure, if their plans pan out.

Consider M&M, which is moving horizontally away from its core of UVs into everything from two-wheelers and trucks to sedans and electric vehicles. The endeavour is to be a 'mobility' player, hedging its risks in the hyper-competitive UV segment and at the same time opening up new niches for growth.

Tata Motors new cars
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Tata Motors, too, has plenty of room to move horizontally. There are few options but to fill the glaring gaps in its portfolio if it has to stem the erosion in share. Analysts point out that there are few significant products that exist between the entry-level and the super-premium (JLR) segments at Tata Motors. Filling those gaps clearly is the priority.


Communicating through its media agency Rediffusion, Tata Motors says it has plans for products across segments — from mini, small and compact cars to SUVs and MPVs. "It has the entire product strategy mapped till 2020 to bring in new products, facelifts and refreshes," the agency said. Tata Motors is also looking at newly emerging segments in which it does not have a presence. Example: a softroader (cars with four-wheel drives but not an out-and-out offroader like, say, a Landcruiser). Alternative fuels, hybrids and e-vehicles are also on the radar. Meantime, there are opportunities for JLR to straddle price points below the super-luxury segments — areas in which Mercedes, BMW and Audi are strong — and thereby add to volumes. Also Read: Tata Motors unveils 8 model upgrades

To achieve all this, Tata Motors has committed to investing close to Rs 3,000 crore annually in capital expenditure over the next few years.

Mahindra Verito

New Marketing Strategies

Intensifying competition across segments is forcing the domestic carmakers to rewrite some traditional marketing concepts. One, there are no segments, only differentiated products. Two, niche is not a bad word, and a presence across a number of niches can be more rewarding than attempting to amass volumes in one segment.


Consider, for instance, the gradual merging of the sedan and UV categories, which is resulting in the phenomenon of crossover cars. UVs are looking more like cars (with luxury features, and car-like suspensions and ride heights); and cars are increasingly looking like UVs (with UV like grilles and spare wheels at the back). Mahindra has observed that shift and reckons this trend could be his passport into the sedan segment.


The Verito sedan, for instance, has SUV-like beefy grilles and tail lamps. "Old definitions of segments are going to get blurred," he says. "Once you defined cars by horsepower, engines. Segmentation in the car industry today will be psychographic. M&M psychographically is about safe, strong, powerful, rugged vehicles, irrespective of the segments." It's having such rugged and macho vehicles across niches — from SUVs to two-wheelers — that Mahindra reckons is the way to go. "Mahindra's brand strategy is about niches across areas of mobility. The goal is to go across segments and get scale horizontally," he adds.

Tata Indica

The Early Days

Both Tata Motors and M&M started their journey almost together in 1945. The former began with commercial vehicles (CVs), making trucks and buses in India. Using its understanding of the LCV business, it entered the passenger vehicle (PV) business in 1991 with the launch of Tata Sierra and later Tata Estate and Tata Sumo.

Led by Ratan Tata, passionate about the automobile business, Tata Motors (Telco then) made its first big bet with the launch of Indica, India's first indigenously developed passenger car in 1998. "The evolution of Tata Motors from primarily a CV company to a complete automobile company was a strategic one. The auto industry often tends to be a cyclical one. Since a significant downturn in 2000-01, Tata Motors decided to de-risk itself by establishing presence across both commercial and passenger vehicles," says Rediffusion, Tata Motors' agency partner. Since then, while building its CV and LCV business, Tatas has worked hard to grow its PV business with bold experiments like the Nano.

"The Tatas are very much a broadspectrum player straddling CVs and PVs. And it has always been a groundbreaker that has believed in making bold bets — may it be Indica, Nano or JLR," says V Sumantran, vice-chairman, Ashok Leyland, who also worked at Tata Motors.

M&M has taken a slightly different route. It started its journey by importing CKD kits of the Willys Jeep for the army in the 1940s. It ventured into LCVs and tractors by 1960s. Since then over the years, it has remained sharply focussed on the UV segment. And the mobility strategy notwithstanding, the importance of the core business is underscored by the ambition articulated by Pawan Goenka, president of the automotive and farm equipment businesses of M&M: "We want to be known as an SUV company in the world," he declares.

"M&M has been relatively a more focussed player. It does not want to necessarily play the high-volume car segment," adds Sumantran.

Jaguar XFR engine

The Global Edge


Both the domestic automakers have their international arms, grown inorganically. For Tata Motors, the $2.3-billion buyout of JLR is a glowing contrast to the bleak scenario back home.

In 2012-13, the consolidated operation was able to report a net profit of just under Rs 9,900 crore thanks largely to the contribution from the global premium brands. JLR also gives Tata Motors access to geographies, including China — the world's largest car market — where the former Ford brands grew 48 per cent in 2012-13.

The technology benefit is dubious, although there have been suggestions that Tata Motors and JLR could share engine technology and jointly work on product development.

Says Pankaj Ghemawat, an economist and global strategist: "My impression of Tata-JLR is that sharing opportunities between the two is pretty limited. Tata Motors has an issue and the last thing you want to do is to force commonality with JLR. [In contrast] Ssangyong is critical for M&M to refresh products and develop new models."

To be sure, the synergies between Ssangyong — acquired for $470 million — and M&M are more apparent, perhaps because the technology gap between the two brands is not glaring. So the Ssangyong acquisition gives M&M not just access to higher-end SUVs, R&D capabilities and a multination dealer network, it also helps the Indian automaker derive savings from joint sourcing and joint product development.

Mahindra e2O electric car

Last year, M&M and Ssangyong jointly began developing a family of six small engines — from 1 litre to 1.6 litres — to power some of their proposed new launches. The R&D team of each automaker will work on three engines; sourcing for all six will be a joint effort. For M&M, the global journey has only just begun. Mahindra likens global growth to a pyramid with three tiers. He's already there at the bottom, with his "no-nonsense, honest, value-for-money products" like tractors which are a rage in markets like South Africa and Chile. At the middle of the pyramid — which is about good quality at affordable costs — he will rely on Ssangyong to do exactly what other Korean automakers like Hyundai and Kia have been able to achieve in the West. And the top of the pyramid? "When it comes to premiumness you cannot build something overnight. You have to acquire." Which is why Mahindra made a play for super-premium brand Aston Martin.

He didn't succeed, but rather than scouting around for other such high-end auto brands, M&M may also have another ace up his sleeve: "We can also build something overnight with technology. That's why we have the Reva brand," says Mahindra. "So the choice at the top is either acquiring a legacy brand or building revolutionary technology. I believe success in electric vehicles will come from a price-insensitive customer segment." Related: Mahindra e2o Special Coverage


These are alluring long-term opportunities that promise to change the contours of India's home-grown automakers, but for the time being they will have their hands full protecting their bread and butter even as they go about blueprinting their long-term jam.

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