Tata group chairman N Chandrasekaran sees the next few years as a decisive phase for one of the group’s most iconic companies and cash cows: Tata Motors.
In its annual report for the year financial year 2018-19, Chandrasekaran said that it “has to focus on strong operational excellence to deliver positive cashflows while making the right investments to be prepared for the future”. The chairman of the company began by pointing out that the industry, both globally and domestically, is facing disruption and a challenging environment.
“Concerns about sustainability are leading the governments across the world to push for a reduction in the carbon footprint, encouraging the adoption of electric vehicles. These changes coupled with geopolitical trade situation, uncertainty around Brexit and slow-down in China have led to a period of uncertainty for the global auto industry,” he said, adding that for India the sector faces some challenges in the near to medium term “due to the ongoing credit crunch, low consumer spending and the transition from BSIV to BSVI emission norms by April 1, 2020. The growth in the commercial vehicle market is likely to pick-up driven by increased infrastructure spending, growth of new-age industries like E-Commerce and further progress in the hub and spoke model of distribution.”
The key to succeeding in this environment will be to transform with the times, he said, adding, “This will require us to form partnerships, develop mobility solutions and optimise our investment in the process.”
Speaking about specific challenges faced by the company and its units over the past financial year, Chandrasekaran said that from an operational performance perspective, the last twelve months have been challenging for Jaguar Landrover.
“These (challenges) have resulted in the business reporting a revenue decline this year and an operating loss,” he said, adding that the company faced headwinds from several external factors, including slowdown of sales in China and Europe along with internal factors such as the high fixed cost structures, dealer network profitability and high investment outlays during the year leading to cash outflows.
However, the company is “taking steps to cut costs while taking a calibrated approach towards future investment in the product portfolio,” he assured shareholders.