Tata Offers First Car Buyback as Sales Plummet: Corporate India

Tata Motors Ltd. (TTMT), India’s biggest automaker, has a new strategy to revive car sales from a decade low: the company is promising to buy back your Manza sedan.

The Mumbai-based carmaker said it will guarantee customers 60 percent of the purchase price after three years on cars they buy in the next two months, according to an e-mail response from the company. Tata Motors, led by Chairman Cyrus Mistry, also cut prices for some of its cars this week by as much as 50,000 rupees ($912). The Manza model will be about 8 percent cheaper.

The plan to repurchase cars shows the owner of Jaguar and Land Rover is “desperate” as it has lost share in Asia’s third-largest car market to Toyota Motor Corp. (7203) and Mahindra & Mahindra Ltd. (MM), according to Deepesh Rathore, the India managing director of IHS Automotive. Passenger vehicle sales at the company plunged 70 percent last month to the lowest in a decade.

“Tata Motors has a big problem in the local car business,” said Juergen Maier, a Vienna-based fund manager at Raiffeisen Capital Management, which oversees about $1.1 billion in emerging-market assets. “Tata Motors needs to get its quality and design right.”

India’s automakers’ association in January lowered its full-year domestic car sales forecast for the third time in six months as slowing economic growth and high interest rates continue to keep buyers from showrooms. February passenger car sales at Tata dropped to 10,613 from 34,832 a year earlier. Deliveries at Maruti Suzuki India Ltd. (MSIL), the nation’s biggest carmaker, fell 9 percent to 97,955.

Photographer: Dhiraj Singh/Bloomberg

The Tata Motors Ltd. logo is displayed on an Indigo Manza club class sedan in Mumbai. Tata sold 7,485 units of the Indigo and Indigo Manza sedans in the 10 months to January. That’s 6 percent of Maruti’s DZire sales in the same period. Close

The Tata Motors Ltd. logo is displayed on an Indigo Manza club class sedan in Mumbai.... Read More

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Photographer: Dhiraj Singh/Bloomberg

The Tata Motors Ltd. logo is displayed on an Indigo Manza club class sedan in Mumbai. Tata sold 7,485 units of the Indigo and Indigo Manza sedans in the 10 months to January. That’s 6 percent of Maruti’s DZire sales in the same period.

Credit Card

Former Chairman Ratan Tata hired Karl Slym as managing director from General Motors Co. (GM)’s China unit to revive vehicle sales. Slym last month said he plans to build a diesel version of the Nano, the world’s cheapest car, after introducing a new version of the Indica hatchback.

Tata today said it partnered with five banks including HSBC Holdings Plc and ICICI Bank Ltd. (ICICIBC), India’s second-largest lender, to offer customers the ability to buy the Nano using credit cards.

Tata Motors’ shares, which have declined 1 percent this year, rose 3 percent to 309.4 rupees in Mumbai, the highest since Jan. 23.

Sales of the company’s trucks, buses and cars at home accounted for 36 percent of group revenue of 1.66 trillion rupees ($30.2 billion) in the year ended March 31, down from 43 percent in 2010, according to data compiled by Bloomberg.

Declining Profit

Profit at the Jaguar Land Rover unit, which contributed 74 percent of Tata Motors’ operating income in the year ended March 31, declined 25 percent to 296 million pounds ($449 million) in the three months to Dec. 31. Tata Motors reported a loss of 4.6 billion rupees for its Indian business as sales at home dropped 21 percent to 105.3 billion rupees.

Tata sold 7,485 units of the Indigo and Indigo Manza sedans in the 10 months to January. That’s 6 percent of Maruti’s DZire sales in the same period.

Maruti sold 131,177 units of its DZire, according to data from the Society of Indian Automobile Manufacturers. Toyota’s sales including utility vehicles rose 6.4 percent to 133,296 in the 10 months to January.

Ratan Tata unveiled the Indica, the company’s first car, in 1998 after spending two years and 17 billion rupees on developing the vehicle. The company then called Tata Engineering & Locomotive Co. bet Indians will prefer a 98 percent locally made, cheap passenger car to the more-expensive foreign models.

‘Dead Cat Bounce’

“I doubt Tata Motors will be able to improve their market share,” Surjit Singh Arora, an analyst at Prabhudas Lilladher Pvt. in Mumbai. “Unless they upgrade their platforms, it looks difficult for Tata Motors.”

Maruti has seven versions, including gasoline and diesel options, of its DZire, while Tata sells 17 variants of the Indigo and more than 20 for the Indica, according to the companies’ websites.

“Tata continues to sell old generation models with the new. This is bad strategy,” said Mahantesh Sabarad, an analyst at Fortune Equity Brokers India Ltd. in Mumbai. When Honda Motor Co. or Maruti “introduces a new generation, they phase out the old ones.”

The company’s buyback offer will be valid for cars which haven’t had a major accident and carry a valid insurance policy, according to the e-mail from Tata Motors. The automaker doesn’t plan to extend the repurchase plan, which it says “will surely boost sales,” to other models.

The plan may help Tata see a “dead cat bounce in sales,” Sabarad said. “I don’t expect market share to increase.”

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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