Tata Motors only truck maker to reduce discounts, says CV unit chief

Topics Tata Motors | car discounts | trucks

Mr. Girish Wagh - President, Commercial Vehicle Business Unit, Tata Motors.
Tata Motors has reined in discounts on its trucks though the commercial vehicle market remains subdued, said Girish Wagh, president of the company’s Commercial Vehicle Business Unit. He added that the truck market leader rolled back discounts by almost a third as it was transitioning to stricter emission norms. 

“We took a very bold decision during BS-VI transition. We passed on half the increase through an increase in the list price (it’s a ball park estimate) the rest was passed on through a reduction in discounts. As a result, we have been able to reduce the discount by at least 30-35 per cent,” said Wagh.

However, not many agree with Wagh’s assertion. SP Singh, senior fellow at Indian Foundation of Research and Training (IFTRT), says discounts continue to be very high. “They (truck makers) have taken a disproportionate increase in prices (15-30 per cent) on BS-VI vehicles so that they get enough headroom to discount,” says Singh.

Tata Motors’ archrival, Ashok Leyland, is even more aggressive, says Singh. It is making it tough for a relatively new entrant like Mahindra and Mahindra. “They are the only ones refusing to give in to discounting pressure and for that reason often find themselves sidelined,” says Singh.

Higher tonnage trucks, which have been the worst hit due to the deceleration in the economy, have started seeing a sequential recovery on the back of improving economic indicators, said Wagh, adding that strong demand in rural India, pick up in infrastructure, mining and e-commerce have helped. 

However, despite that and strong demand for the light, small and intermediate commercial vehicles, the overall CV market will end financial year 2020-21 (FY21) with a 25 per cent year-on year decline, said Wagh. Apart from the recovery, it also takes into account last year’s low base effect, he added.

FY19 was a record year for M&HCV trucks. It was followed by a 50 per cent decline in FY20. In the first eight months of FY21, it has fallen almost 50 per cent year-on-year. Further supply chain disruption or shortage of semiconductors can derail the recovery, he cautioned.

Business continuity plan immediately after the pandemic coupled with cost curtailment measures  and cash conservation strategy helped the company tide over the crisis. “We looked at every cost element and all the levers, very closely and came up with innovative ideas to contain costs,” he said. This helped it report a good performance in Q2. With volumes picking up in Q3, it will help further, said Wagh.

As part of the turnaround plan, Tata Motors announced a voluntary retirement scheme, effective from December 11 till January 9.

Mitul Shah, research head at Reliance Securities, is very positive on the company. “We expect the M&HCV segment to grow 150 per cent in FY22. This will come on the back of pent-up demand, last year’s low base and the beginning of an up cycle. The segment has been in a down cycle for two-and-a-half years. Tata Motors being the market leader will be the biggest beneficiary,” said Shah.

Commenting on Tata Motors’ subsidiarisation plan, as part of which it will hive off the passenger vehicle business as a separate entity,  Wagh said amid the rapidly landscape and growing competition the move will help both CV and PV units realise their potential. “It will enable both business units to chart their own future while leveraging synergies at the backend.”

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