Slym to Pare Model Line-Up to Salvage Tata Motors Sales

Two weeks into his new role, Karl Slym, managing director of Tata Motors Ltd. (TTMT) plans to scrap models and change perceptions about quality as India’s biggest automaker struggles to stem losses in market share.

The company, which chose the first 100,000 customers for the Nano, the world’s cheapest car, through a lottery following a deluge of orders in 2009, lost buyers after at least three Nanos caught fire. The company’s market share in the utility vehicle segment has also plummeted to 9 percent, according to data from the industry association.

“There’s potential for pruning as we bring in new products, as well as to make sure we have a portfolio that is all performing,” Slym, the second General Motors Co. (GM) executive hired to run the Mumbai-based company by Chairman Ratan Tata, said in an interview. “We suffer from a little bit of perception of poor quality from previous years. We will continue to impact those concerns.”

Tata, which is also faced with slowing sales at its Jaguar Land Rover unit, plans to improve features and add variants of its more popular models at home to rival Maruti Suzuki India Ltd. (MSIL) and Toyota Motor Corp. (7203) in Asia’s third-largest car market. Tata’s utility vehicle Sumo and sedan Indigo had more quality problems than the average compared with similar products from Toyota and Maruti, JD Power & Associates said in a report.

“Quality is among the top five reasons of purchase and Tata Motors loses out on both quality as well as the lack of new variants,” said Mohit Arora, executive director at the Asian unit of researcher JD Power in Singapore. Rival Mahindra (MM) & Mahindra Ltd. “too has issues with quality but they have managed to offset that with new launches,” he said.

Unexpected Drop

Tata Motors has risen 48 percent in the past year. It rose 1 percent to 264.90 rupees at the close of trade in Mumbai, compared to a 0.2 percent increase in benchmark BSE India Sensitive Index.

The company on Oct. 15 reported Jaguar Land Rover sales fell 4.3 percent to 26,461 units last month. That missed the 30,000 median estimate of 20 analysts surveyed by Bloomberg News.

In India, Slym, who joined from GM’s China unit, where he was executive vice-president at SAIC-GM-Wuling Automobile Co., will have to snare customers rushing to buy rival products.

Sales of five models of utility vehicles at Tata Motors, which began selling the cars in 1994, rose 16 percent to 23,008 in the six months to Sept. 30, while industry volumes jumped 56 percent. Deliveries of Maruti’s Ertiga surged 10-fold to 40,366 since April when it began sales. Mahindra led the utility market with a demand of 121,367 units.

Sumo Problems

Customers reported 145 problems per 100 Sumo vehicles, compared with an average of 135 in the segment that was led by Toyota Innova with 45 quality issues, according to JD Power. Tata Indigo had a score of 162, higher than the mean 138.

“Tata Motors needs needs to realize that customers have more choice today and the competition is only going to get tougher, especially in SUVs, where every manufacturer is looking at bringing in models,” said Deepesh Rathore, the New Delhi- based managing director of IHS Automotive in India. “They need to look at what Mahindra has been able to do.”

Mahindra had to close bookings twice after getting swamped with orders following the introduction of its XUV500 SUV last year. The vehicle initially received 8,000 orders in 10 days, and led Mahindra to increase production to 5,000 a month, from the initial 3,000 unit capacity.

Last month the company started selling a smaller and cheaper version of its Xylo model named the Quanto, which got 5,000 bookings in three weeks. Mahindra today began selling the Rexton, the first model from its Ssangyong Motor Co. (003620) unit which it acquired last year.

Aria SUV

In contrast, Tata Motors’ new utility vehicles have failed to evoke the response generated by Maruti’s Ertiga and Mahindra’s XUV500. Total sales of the company’s Aria SUV and Xenon pick up truck plunged 82 percent to 329 in the six months though Sept. 30, while combined deliveries of Tata Safari and the Grande dropped 39 percent in the period.

“The Aria is something that is definitely a good example of a great product that is missing the consumer,” Slym, 50, who joined the company on Oct. 1 said yesterday. He didn’t identify models that might be scrapped.

Tata Motors started as Tata Engineering & Locomotive Co. in 1945. It partnered Daimler AG in 1954 to produce trucks and moved into making passenger cars in 1991. The company first displayed the Nano at the New Delhi auto show in 2008.

China Experience

After the fires, the company in December 2010 lengthened warranties to four years or 60,000 kilometers (37,290 miles) and started offering as much as 90 percent financing through unit Tata Motors Finance Ltd. It has sold 214,932 Nanos since 2009.

Yesterday it started selling an updated version of its Manza sedan and today introduced its new Safari Storme SUV priced at 990,000 rupees in New Delhi. Tata Motors will offer dedicated service advisers for the Manza Club Class that starts at 570,000 rupees in New Delhi.

Slym’s experience in China, the world’s biggest automobile market, may help in changing perception, which is “dependent on marketing,” said Umesh Karne, an analyst at Brics Securities Ltd. in Mumbai, who recommends investors buy Tata Motors.

“I have to blend the international experience I’ve got with working for multi-national companies with Tata’s local strengths,” Slym, who has also worked with Toyota, said. “Our aspirations are to grow domestically as well as to grow internationally.”

To contact the reporter on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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