Here’s How Tata Motors Plans To Increase Domestic Market Share

Guenter Butschek, the new CEO of Tata Motors (NYSE:TTM)  is working on a three year “2019 plan” to put the company’s domestic business on track. After being without a CEO for nearly two years, Tata Motors started losing market share in the passenger and commercial vehicles market in India.  The new CEO now plans to realign verticals such as production, supply, research and development so as to remove operational bottlenecks. The company is unable to deliver passenger vehicles within a reasonable time, creating  huge delays in delivery most of its vehicles.  This has been one of the reasons for the loss of market share. The company now plans to address this issue and is targeting a double digit market share in the passenger vehicles segment in India.

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Addressing Operational Challenges To Increase Market Share

In 2015-16, Tata Motors’ market share in the commercial vehicles segment declined to nearly 44% while share in the passenger vehicles market declined to 5.4%. Through the restructuring plan the company now plans to achieve a 50% market share in the commercial vehicles segment and has a target of a double digit market share in the passenger vehicles space. The restructuring plan aims at breaking the silos, ensuring that new vehicles are launched on time and enough inventories are maintained to meet the market demand. The company faces intense competition from Ashok Leyland and Eicher Motors in the commercial vehicles segment and capturing a higher market share could be a tough task.

As per our estimates the domestic segment accounts for 8% of Tata Motors’ valuation and we expect the company’s market share in the Indian automotive market to increase from around 13.6% in 2016 to more than 15% by the end of our forecast period. During the same period we expect the Indian automotive market to witness a steady increase and the number of vehicles sold to rise from 3.4 million in 2016 to around 4.7 million by the end of our forecast period.

While a high market share in the domestic market will not impact Tata Motors’ valuation significantly, given that it represents a small percentage of the total valuation, this segment is critical for long term growth. The Indian automotive market is growing strongly and has a huge potential in future. Tata Motors’ focus to increase market share in the region will enable the company to establish its lost identity and lay a strong foundation to capture growth in the region in future.

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