Wednesday, May 31, 2023

Why there are major challenges ahead for Tata Motors’ new CEO & MD Marc Llistosella?


Marc Llistosella will be at the helm of Tata Motors from July 2021, succeeding Guenter Butschek. He is expected to revive the CV business and sustain the PV business’s growth momentum.

Tata Motors has announced last week that it has appointed Marc Llistosella as its new CEO and Managing Director, effective from 1st July 2021. He will succeed Guenter Butschek, who has led the company for almost five years since taking the helm of the homegrown automobile manufacturer in January 2016. Despite Marc Llistosella having extensive experience in the Indian market, in the commercial vehicle segment with Daimler India Commercial Vehicle (DICV), between 2008-2014, when he was the MD and CEO of DICV, reviving Tata Motors’ CV business and sustaining the growth momentum of the automaker’s PV business won’t be an easy task for him.

Also Read: Tata Motors appoints Marc Llistosella as new CEO and MD

The appointment of Marc Llistosella indicates that Tata Motors aims to focus on its commercial vehicle business to drive the profitability from its India operations. The move is also pointed at the conglomerate’s aspirations to improve its presence in the export markets across the world, especially in Asia and Africa. This would reduce the automaker’s dependence on the domestic market as demand for commercial vehicles has dipped severely in India since the beginning of the economic slowdown and lately due to the pandemic.

In April-December FY21, Tata Motors’ CV sales dipped by 41.3% to 142,292 units.

However, reviving the CV business of the homegrown auto giant will not be a cakewalk for sure. Despite Marc Llistosella’s rich experience in the segment, and practically being credited for setting up Daimler’s bus and truck unit in India, there will be several headwinds. Tata Motors’ commercial vehicle sales dropped by 34% to 340,700 units in FY20. In FY21, the sales dipped further by 41.3% to 142,292 units between the April-December period.

In the domestic market, the automaker registered 28% YoY growth with 57,742 units sold in January 2021. While its domestic CV sales slumped by 2% YoY in January 2021, its PV business witnessed a 94% YoY surge in sales. During the third quarter of FY21, Tata Motors posted a net profit after three consecutive quarters of loss. The auto manufacturer posted a net profit of Rs 2,941.48 crore in the third quarter ended in December 2020, up 67.52% as compared to Rs 1,755.88 crore recorded a year-ago period.

Trucks on road truck rental

Troubled CV business in focus

It is very apparent that Llistosella’s appointment has been made with an eye on the commercial vehicle business, a segment where Tata Motors is in the leading position. The commercial vehicle business forms the lion’s share of the auto manufacturer’s India business’ bottom line.

Both the MHCV and LCV business of Tata Motors have slumped since 2019, due to economic slowdown, revised axle norms, BS-VI emission norms, and lately Covid-19 crisis.

Heavy and medium-duty truck (MHCV) sales of the OEM have been declining since 2019 because of multiple factors like economic meltdown, revised axle norms, and transition to BS-VI emission norms. Sales of light commercial vehicles (LCV) have also slumped during the concerned period. Lately, the Coronavirus pandemic made the crisis severe, and sales of CVs nosedived to record lows.

However, since December 2020 quarter, sales of commercial vehicles have started to recover gradually, in line with the improvement in overall economic activity across the country. Renewed focus on infrastructure and construction activities will aid in the growth further. Tata Motors targets to further consolidate its position in the CV segment in line with the potential growth opportunity.

Not only CV, but the continuing Tata Motors’ momentum in the passenger vehicle segment too will be a tough task for Llistosella, especially at a time, when the industry is going through a lot of disruptions and transitions. Amidst such a phase, the automaker has witnessed a positive change in its perception towards passenger cars. The renewed product strategy of the homegrown brand has contributed to a turnaround of its PV business amid the Covid crisis.

Globally, in the PV segment, JLR accounts for around 80% of Tata Motors’ consolidated revenue.

In the electric car segment of the country market too, Tata Motors has proved itself and grabbed the leadership position with Nexon EV and Tigor EV. The automaker has sold more than 5,000 EVs in the domestic market under the leadership of Guenter Butschek. Continuing the brand’s journey on this path will be one of the key focus areas for Marc Llistosella.

According to analysts, reviving the CV business and bringing back it to the growth path alongside sustaining PV businesses growth momentum would be a major challenge for the new MD & CEO in the short to mid-term, over the next 2-3 years. Globally, in the passenger vehicle segment, Jaguar Land Rover accounts for around 80% of Tata Motors’ consolidated revenue. Hence, the global performance and growth strategy of the British luxury carmaker will be a key focus area for Marc Llistosella from the beginning of his journey with Tata Motors.

Tata Sierra EV Concept Impact 3.0 car design

What Marc Llistosella can do?

While under Guenter Butschek’s leadership, Tata Motors has been able to turn around its Indian operations, remained almost unscathed during the Covid-19 crisis, challenges continue on the improvement of its financing subsidiary operations. According to industry experts and analysts, the profitability of Tata Motors Finance is still not at par with other auto financing NBFCs. This will be one of the tasks Llistosella has to focus on.

Marc Llistosella is expected to make Tata Motors become the most aspiring electric CV manufacturer in India.

Improving market share for the homegrown automaker and its subsidiaries across PVs and CVs will be another tough task. Given Marc Llistosella’s past experience with DICV, he is expected to help Tata Motors further consolidate its industry-leading market share in the domestic market. He is also expected to control discounting on finished products in the marketplace, which would help the industry altogether. Considering the pro-trend of the industry towards electrification and renewable energies, and Tata Motors’ significant improvement in the electric PV segment, Llistosella is expected to help the automaker become the most aspiring electric CV manufacturer in the Indian market.

Also Read: Untamed fuel beast and JLR’s ‘Reimagine’ strategy

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