Tata Motors’s stern message to vendors: focus on quality

Cyrus Mistry warns relationships may get compromised if vendors don’t work with firm on improving quality

Focus on quality—that was the stern message that went out to the vendors of Tata Motors Ltd from Cyrus P. Mistry, chairman of the Tata Group at the company’s annual vendors’ meet on Tuesday.

Addressing around 200 suppliers in Pune, Mistry warned that “relationships may get compromised”, if vendors do not work with the company on improving quality, said four people who attended the meet.

“There will be zero tolerance on non-compliance on quality,” said Mistry.

In an email response, a Tata Motors spokesperson said, “Tata Motors remains committed to the highest quality standards and this continues to be emphasized at all our forums, including various supplier forums.”

“Various initiatives towards enhanced product and supplier quality are a key part of the company’s Horizonext strategy in the recent years, to continue being a market leader or gain improved market share and for its journey as a significant global automotive company,” said the spokesperson.

Tata Motors, which so far has been exporting cars to neighbouring markets, such as Bangladesh, Sri Lanka and Bhutan, will be entering newer export destinations over the next two years. This makes it all the more important that high standards are maintained across the company’s models.

Tata Motors launched the Bolt sedan and hatchback in South Africa on 7 October, the company said in a statement.

Mistry’s emphasis on quality comes against the backdrop of a negative brand perception that the Mumbai-based auto firm has been struggling to overcome.

Asked about tepid response to its passengers cars Zest and Bolt, the chairman of the $100 billion+ Tata Group conceded that the perception of Tata-branded cars need to be improved and efforts to achieve this will have to go beyond advertisements or brand campaign.

The brand has to deliver on its promise of after-sales service, performance and other areas, Mistry had said at the meeting, according to one of the four people quoted above—a senior executive at an auto component maker who attended the meet.

Tata Motors launched the Bolt in India in January this year and the Zest sedan in August last year in a bid to resurrect its flagging fortunes. While the new models have helped arrest sliding sales, the performance is not as strong as the company had anticipated, top executives conceded at the meet.

Led by the new models, Tata Motors’ passenger-vehicle sales increased to 62,614 units in the first five months of the current fiscal from 58,766 units in the year-ago period, according to the industry lobby Society of Indian Automobile Manufacturers (Siam).

Its market share dropped marginally in this period to 5.70% from 5.71% a year ago.

Tata Motors’ performance in the utility vehicle segment continues to slide. In this segment, the company sold 8,035 units in the first five months of the current fiscal compared to 10,878 units in the year-ago period. The maker of Sumo and Safari ceded further ground to rivals as it saw its market share drop to 3.69% from 4.94% a year ago.

As part of a long-term product launch strategy, Tata Motors plans to introduce two new passenger vehicles every financial year till 2020. It plans to launch a new hatchback and sedan based on the same platform, code-named Kite, later this fiscal year.

For Tata Motors, a real turnaround in the passenger vehicles segment will only be seen starting 2017 when the firm launches new models on a completely new platform, said analysts.

Both the Zest and Bolt, and even the Kite, which they plan to launch next year, are based on the Indica platform, said Nitesh Sharma of PhillipCapital (India) Pvt. Ltd, a financial services firm.

Tata Motors also have to deal with perception issues, as the brand has been seen as low-end ever since the launch of the Nano, added Sharma.

The vendors’ meet on Tuesday was also addressed by officials from the company’s subsidiaries in South Korea and the UK.

A senior executive from Jaguar Land Rover Automotive Plc said that JLR plans to assemble more models in India. The local arms of German rivals—Daimler AG, which sells cars under the Mercedes-Benz brand, Bayerische Motoren Werke AG (BMW) and Audi AG—have been pushing local assembly, which helps cut duties and lower prices.

Tata Motors on Wednesday ended at Rs.341.20 on the BSE, up 2.31% from previous close while India’s benchmark index Sensex rose 0.38% to close at 27,035.85 points. Tata Motors shares have gained more than 14% since the start of the month.

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