DSIJ Interview with, P B Balaji Group CFO, Tata Motors
P B Balaji
Group CFO, Tata Motors
"We want to take the lead in shaping Indian CV industry with path-breaking technologies and innovations"
Balaji is a global finance professional with over two decades of experience in the corporate sector. He started his career with Unilever in 1995 and worked in different corporate finance roles across Asian markets, Switzerland, UK and India. Since 2014, he has been heading the finance function as the Chief Financial Officer of Hindustan Unilever, a $6 billion enterprise. Prior to that, he was the Chief Accountant of the Unilever Group in London.
Can investors expect financial performance of Tata Motors to improve in the coming quarters?
With Turnaround 2.0, we will continue to enhance the organisation's effectiveness, enabling greater speed, simplicity and agility in our efforts. Our plan is to focus on sustaining the momentum for the CV business and to further increase our market share in the PV segment
We plan to manage transition through more personalised and calibrated change in CVs, while delivering elevation through more individualised experiences in PV. We have started the year with a bang, with an 86% growth in our domestic sales in April 2018 and we can only go higher from here
With regards to JLR, the contribution margins are healthy. We are keen to step up on the operating leverage. Our portfolio is starting to fill up with plug-in hybrids and electrics. That means that all the products which are there with electric options are starting to sell exceedingly well. Range Rover, Range Rover Sport get their full model year impact as well this year. We are quite excited and expect to see both demand and profitability improve in FY19 compared to last year
How is the company planning to bolster up its topline?What are the cost reduction initiatives undertaken by the company under your leadership?
As mentioned earlier , under Turnaround 2.0, we will continue to enhance the organization's effectiveness enabling greater speed, simplicity and agility in our efforts. Our goal is to continue sustaining the momentum for CV Business and further increase our market share in the PV segment. We will manage transition through a more personalized and calibrated change in CVs, while delivering elevation through more individualized experiences in PV
We plan to do this by enhancing our presence in emerging countries, with a focus on APAC, Africa and Middle-East markets, on the back of new range of world-class products like the Xenon, Super Ace, Prima and Ultra range of trucks. For PVs, we will focus on filling in product gaps and tapping the white spaces that will emerge Our portfolio of gaps have also been filled. Due to supply chain challenges, we have not supplied the full number of vehicles that we would want to supply. Therefore, this year things are getting fixed. We have grown too fast compared to what our capabilities were and we have picked up shares. Therefore, it is important that we build the capability to meet the demand
We have already taken tough decisions for streamlining and consolidating the businesses through the sale of defence business to TASL and shelving the Racemo project to improve cash flow. We have also had a significant ramp-up of production by nearly 22%, thanks to the structural debottlenecking of the supply chain. The exceptional contribution to the bottomline by cost reduction efforts is enabling us to build a robust cost structure and competitive advantage as we go ahead
How is the company planning to cope with sector-defining challenges, namely, the advent of electric vehicles and stricter emission norms?
We at Tata Motors have identified sustainable transportation as one of the core elements of our company strategy, in line with the Sustainable Mobility Vision outlined by the Indian government. Over the last one decade or so, we have been continuously innovating in the electric mobility space across our passenger and commercial vehicle portfolio. Over the years, we have run several projects and demonstrated EV concepts like Vista, Zest, Bolt, Tiago, Tata Ace, Tata Ace Magic and the Iris. With our understanding of the technology and customer requirements, we have bagged the order for Tigor EV, which we are supplying to EESL currently. In the commercial vehicle category, we successfully participated in the EV bus tendering process and have won orders from six out of the 10 cities (62% of the total tender order)
There are primarily two concerns when it comes to electric vehicles in India. Firstly, EV battery cost continues to be a dominant aspect of vehicle electrification. As the conventional IC powertrains are replaced by Li-ion battery, motor and reduction drive, the cost of the propulsion system goes up significantly. This means, despite FAME incentives, the on-road price of a typical B segment car is well beyond the expectations for a retail customer, eventually limiting its penetration. Optimising the costs of the electrical drive systems and providing a commensurate payback in terms of reduced operational costs are the major challenges for OEMs, including Tata Motors
Another challenge is the absence of electric charging infrastructure. Customers are reluctant to take on an EV with the uncertainty of being able to recharge the batteries
How is the company's restructuring plan helping it improve its market share across various segments?
The company has been streamlining and consolidating the businesses. The new modular platform strategy across CV segments will enable more variety to the customers. We want to take the lead in shaping the Indian CV industry with the introduction of path-breaking technologies and innovations. We are working towards enhancing the value proposition and the total cost of ownership for customers, while bolstering revenue potential. We are now the sixth largest CV player and the fourth largest truck manufacturer globally
In PVs, Turnaround 2.0 strategy will focus on filling in product gaps and tapping the white spaces that will emerge — sporting a robust product pipeline with its current and future products. The focus will be on driving volumes and increasing market share. TML will leverage its architecture strategy through the OMEGA and the ALFA architectures and the plan is to deliver 7-8 products/variants from these two platforms
We also plan to enhance our presence in emerging countries, with a focus on APAC, Africa and Middle-East market on the back of new range of world-class products like the Xenon, Super Ace, Prima and Ultra range of trucks
The company has recently unveiled several EVs in the CV and PV segments. What proportion of the company's total investment is likely to be dedicated to the EV segment? How do you view the EV revolution in the Indian auto industry?
We believe that the EV space will emerge gradually, as the customers start experiencing EV products and, more importantly, their inherent benefits of zero emission and lower operating costs. As far as Tata Motors is concerned, we will continue to scout for opportunities to fulfil our e-mobility aspirations
Under the FAME Scheme, Tata Motors has won tenders in six cities (out of 10 cities, which is about 62% of the share of the total tender orders); that amounts to a total order of 190 electric buses. We are also actively engaging with a number of potential customers - from city transport authorities, cab aggregators, private fleet owners and, of course, early enthusiasts. As part of our tender with EESL, we have already completed the production of 250 cars and initiated the execution of phase-2 orders. We are committed to the government's mission of e-mobility by 2030 and continue to work in a collaborative manner to facilitate faster adoption of electric vehicles and to build a sustainable future for India
India's power generation trend is dominated by conventional energy resources like thermal and renewable sources are less as compared to other countries. Don't you think the shift to EVs will burden the conventional power generation and negate the effect of shift to EVs?
Diesel buses consume 30 times more fuel than average-sized cars and, hence, their impact on energy use so far has become much greater. It is estimated that for every 1,000 battery-powered buses on the road, about 500 barrels a day of diesel fuel will be displaced from the market.