Prakash M. Telang , Managing Director (India Operations) of Tata Motors, is a veteran of both the automobile industry and Tata Motors. An engineer with an IIM (A) degree under his belt, Mr. Telang is a member of the elite Tata Administrative Service and has spent most of his three-decade-long career in Tata Motors. In this recent interview in Mumbai with Raghuvir Srinivasan and N. S. Vageesh , Mr. Telang was candid about the challenges faced by his company. Excerpts:
What do you make of the current growth prospects for commercial vehicles (CV)?
I see that two engines are working for us — GDP and the focus on improving road infrastructure. GDP growth may be slowing down but a 7 per cent growth is not small. When the GDP grows, commercial vehicles will continue to grow on its own. Second, our road infrastructure is improving… the Golden Quadrilateral is almost complete. Under the Pradhan Mantri Gram Sadak Vikas Yojana, all villages will be connected with pucca roads. Once that happens, I foresee multifold increase in the requirement of commercial vehicles, not necessarily in the tractor-trailer segment but also in the mid-size and smaller vehicles that enable last mile connectivity. There will also be greater mobility of people between rural and urban areas generating demand for passenger carriers.
Coming to the short term, we are having some problems with CVs slowing down a bit. We are still growing in the low double digits though. Once the government gets going on its policy decisions, then I feel growth momentum will pick up. Earlier the economy used to be dependent on the monsoon but things have now settled down on that front.
The grain-producing regions are doing well now. Gone are the days when a bad monsoon would turn the commercial vehicles industry topsy turvy.
Do you see the market moving towards the higher tonnage vehicles?
That is certainly happening but not as fast as we would like it to. At the turn of the century, the prime mover on the roads was the double-axle vehicle from which it moved to triple-axle and then multi-axle and now tractor-trailers. In the last one year, the growth in tractor-trailers has been faster than before. With these big trucks you can move large loads in quick time and the sophisticated cabins allow you to use two drivers too. In the West, the prime mover is the tractor-trailer. We are not there yet but are getting there. Having said that we need to improve the logistic part; our highways are bogged down with manual toll collections that slow down movement. We need electronic toll systems.
Competition is hotting up in the Ace segment with Ashok Leyland's Dost. How is it affecting you?
I don't want to sound boastful but in the last few years several players came in… Mahindra, Peugeot, Force…but we have not seen our numbers suffer. The market is expanding rapidly and there is room for others. But yes, competition is hotting up and we are watching it closely.
Moving to cars, what next for the Nano?
The Nano is now moving at a good pace in the market. We had to make some corrections in terms of reach, penetration, setting up sufficient outlets in different parts of the country, especially the mofussil and rural areas. Financing for buyers was also a problem and we have addressed that by tying up with several public sector banks. We are moving now and there is no place for complacence. But yes, we should probably have moved faster.
In the compact cars segment, there is a feeling that the Indica needs a more contemporary looking replacement. Your thoughts.
Vista is a replacement for the Indica but we found that it had a loyal set of buyers who wanted it to be continued. Together, the Vista and Indica are selling good numbers. We recently re-launched the Vista as Vista Refresh with the same features as a sedan class car and that is getting a good response.
Where do you stand in the debate on diesel cars now?
Diesel is clearly a more environmentally friendly fuel and for some reason those against it are talking about the older generation engines that are not efficient. The common rail engine now is much more efficient and diesel cars are 25-30 per cent more fuel efficient than petrol cars. When you look at the rising energy bill of the country, diesel cars make eminent sense. In Europe you will see that more than 70 per cent of cars sold are diesel. Of course, the issue of subsidy has been exaggerated in case of diesel cars. As per a survey by the Society of Indian Automobile Manufacturers (SIAM), private diesel use is less than 1 per cent of the total consumption of diesel. I think the issue is being blown out of proportion. It is always easy to point at an SUV on the road and say, “he's the culprit taking all the cheap diesel”, but the reality as shown by SIAM's survey is different.
Assuming that the government imposes an extra duty on diesel cars in the coming Budget, how big will the blow be for you?
Frankly I don't know what's the plan. There are cars that cost Rs.60 lakh and you put a Rs.80,000 duty on them, which is the figure being quoted, and cars that cost Rs.3.5 lakh which will also suffer a similar duty….its out of proportion.
But with a portfolio weighted largely towards diesel cars, won't it hit you badly?
We have petrol cars also. The buying pattern of the customer will change based on the economic calculations. But I do hope that the duty is not imposed.
There is a demand from insurers for increasing third-party premiums due to rising losses. Will higher premiums affect vehicle demand?
Insurance premium is a small part of overall vehicle operating costs. Fuel, tyre and interest costs will be higher. Transporter lobbies are fairly strong so it should be seen if they will allow premium to be increased.
Is the CV market getting too crowded now? We have Daimler, Volvo, MAN and now Scania is also coming in..
That is only to be expected. Europe is not growing and those based there know that they have to find other markets to grow. China and Brazil are also growing fast but there are restrictions on entry unlike in India where we are open.
History shows that when new players enter a market dominated by a couple of players, the dominant incumbent player loses market share. It happened in cars with Maruti. Do you see that happening to you?
There are challenges but we have been anticipating this for quite some time. We have been working on different models of vehicles to combat this and ultimately we believe that reach, penetration, support and service for the product will be very important.
