The MD & CEO, who will relocate to Germany later this year, turned around the fortunes of the company by ensuring a diversified portfolio, launching attractive products, and addressing quality and cost issues
Image credit: Mexy Xavier
However, the climb to the number three position hasn’t been easy.
Laying The Groundwork
Much of the surge in sales in passenger vehicles is due to a rather diversified portfolio after struggling for many years with finding the right products. In January 2020, the company launched what it calls New Forever, an initiative to refresh its products frequently. The 'New Forever' range from Tata Motors includes cars such as the Altroz, Harrier, Tigor, Tiago and Nexon.
The company’s hatchback, Altroz, saw sales of 50,000 units in 2020, within a year of its launch. That translates to roughly over 4,000 units a month. Then there is the Nexon, which sold nearly 50,000 units between January and December last year, and has lately seen a surge in price. In January this year, Nexon sold as many as 8,225 units, its highest ever purchase since its launch in 2017. “When I joined, our product portfolio was possibly not the most attractive one,” Butsheck had told Forbes India earlier. “We were not known to lead launches. Some even concluded that we had an outdated portfolio, while others were consistently bringing in modern products. We were under huge pressure because of lots of new launches by rivals. At the same time, we saw huge pressure on the contribution margin. Even Ebitda was negative. It was clear we needed to change the strategic direction. We needed to take a call on whether the business is sustainable and viable.”Butschek had come to India with a reputation for restructuring companies to improve productivity and profitability. Between 2002 and 2005, as president and CEO of Netherlands Car BV, a joint venture between Daimler and Mitsubishi Motors Corporation (in 2012, Dutch coach maker VDC acquired the company and renamed it VDL Nedcar), Guenter was instrumental in its turnaround.
Between 2006 and 2016, Tata Motors’ domestic passenger vehicle business was struggling. The company had largely been stuck in the fleet taxi market and didn’t have any stellar offerings for private customers. During the same period, the company had launched its much-celebrated Tata Nano, then touted as the world’s cheapest car, before it was finally withdrawn from the market due to poor sales. “Guenter has had a phenomenal role in turning around Tata Motors’ fortunes,” says Puneet Gupta, associate director of Automotive Forecasting at consultancy firm IHS Markit. “When he took over, the company was not even among the top three brands for buyers. It had lost its market share, the supplier side wasn’t doing well and even employee morale was low. He has definitely managed to turn that around.” Much of that trouble, Guenter had earlier told Forbes India was because of issues about complacency, quality, cost and missing products. “For example, we did not even address 50 percent of the market because we had no product,” Guenter had said. “We invited the competition to take our space, and it had nothing to do with changes in the regulatory environment. It was just our inability to take quick actions and to translate changes into a proper product.” Butschek began by bringing in radical changes, which included “six relevant angles of attack”. ‘Angles of attack’ is a phrase used in the aeronautical industry and refers to the angle between an aircraft wing and the direction of the wind, which helps in lifting the aircraft. For Tata Motors, the six angles meant topline cost reduction, improvement of core processes, customer centricity, new technologies, business models and partnerships, and a lean and accountable organisation. First, the company decided to shift its entire product offering on two platforms (a design architecture that includes the underfloor, engine compartment, and the frame of a vehicle): Omega, developed by JLR and used in its wildly popular models Discovery; and Alfa, which was developed in-house. Having two platforms helped in reducing development and manufacturing costs, unlike earlier when there were multiple platforms for various models. Among its coming launches, Harrier was based on the Omega platform, and Altroz hatchback, launched in 2020, on Alfa. Then, there were the complicated layers of management that Tata Motors was infamous for. There were, Butschek says, 14 layers that affected overall productivity. The company brought that down to five, to ensure a lean structure and faster communication. “For long, the Indian customer had stopped considering Tata Motors as a choice of purchase. Under him, Tata has managed to build very good-looking products, which boasts of very high quality,” says an industry executive on condition of anonymity. “Those two factors were instrumental in winning back the customers. He isn’t a magician and definitely can’t bring in the market share overnight. But it can raise its market share to 13 percent since many other carmakers are now struggling.” Going Forward