Tata Motors Goes on Cost-Cutting Drive

• Published On: 8 August 2017
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The carmaker pulled the plug on the Geneva Motor Show, Prima truck racing, and the Tamo sub-brand.

Tata Motors is on a massive cost-cutting drive for its future projects. The company has axed a few that it deems is a distraction or not core to the company’s business. The company’s bread-and-butter CV business has lost some of its market share, and is now hit an all-time low of 38.70 percent in April-May 2017.

Company chairman N Chandrasekaran said, "The commercial vehicle segment has witnessed a continued decline in market share and the passenger car performance has been muted," he said addressing shareholders in the 72nd annual report of Tata Motors.

Cuts are to its business projects, and to expenditure on overheads, which include salaries paid to management and even areas like office rent. Tata Motors sub-brand Tamo, which was set up to create aspirational vehicles independent from the main Tata line-up, including the Racemo. Some board members felt that the investment of ₹250 crore to get the Tamo project off the ground would make more sense in the CV business.

Despite participating in every Geneva motor show since 1998, where it unveiled the Indica and Safari, Tata Motors will skip the 2018 edition. The company missed the July deadline for paying the entry fee - the estimated ₹20-30 crore spent on developing concepts and participating in the show is being looked at as unnecessary for the brand’s future.

The T1 Prima Truck Racing Championship will also be axed - the highly publicised series has done little to boost sales. Sources say that Tata has spent around ₹70 crore a year on the racing series, which was the pet project of Ravi Pishrody, the former head of Tata Motors’ CV business.

The company has also slashed its management’s salaries. Directors and senior management received various cuts in their take home salaries. The company also recently moved its entire domestic vehicles office to a more affordable location. The company’s standalone vehicle business (excluding JLR) has recorded losses of ₹2,480 crore, that’s ₹62 crore over the previous year.

In a recent letter to employees, managing director Guenter Butschek said that the next 3-6 months would be absolutely critical for the company. “Our business plan is going to be extremely demanding with stretched targets, in terms of sales/market share and financial performance,” he was quoted as saying.