Pulled down by a sluggish demand in the commercial vehicles segment and a loss making passenger car segment, Telco posted one of the largest losses in its 56-year history for the present fiscal year. A drastic strategic overhaul is the need of the hour to put the company back on track.
When one of India's oldest industrial doyens, Telco (The Tata Engineering & Locomotive Company) reported huge losses this fiscal, the news was not a bolt from the blue, but that did nothing to reduce the impact of the sad news. Telco reported a huge Rs.500 crore loss, something that will go down in the annals of India Inc.'s history as one of the biggest ever losses by an Indian private sector company. The fact that this loss is incurred by a company that belongs to the prestigious "Tata" group is all the more heartrending. But then there were plenty of indicators that pointed towards a sad show for this fiscal. The demand for CV (Commercial Vehicles) was reduced owing to the fall in the agricultural and industrial growth; the passenger car project was nowhere near the break-even and was proving to be a drag on the dwindling revenues of the company. The company was fast losing its market share to its nearest competitor, Ashok Leyland, besides others. All these had an adverse impact on both the top and the bottom lines of the company.
Just
as in any catastrophe, a series of events led to the present
situation. Telco has taken a number of strides in its 56-year
long history but what ails the company now is probably one
of its most ambitious projects. Telco, which is the market
leader in almost all the auto segments, decided to make a
foray into the passenger car segment the dream project was
to be supported by the cash flowing in from the CV segment.
The idea was to build the first indigenously made Indian car
at an affordable price. This was the context in which Tata
Indica saw the light of the day with its launch in 1999. But
not only did it have to face tough competition from a plethora
of foreign made cars positioned on a similar plane, but its
price too acted as a detrimental factor. While it was marketed
as one of the lowest priced cars, Tata Indica price tag was
nowhere near the promised one when it finally hit the road.
The woes of Indica were far from over. The competing cars
were coming in newer, advanced and better versions while its
up-gradation took precious time making its position rather
uncompetitive in the highly competitive passenger car market.
Even now though the volume of Tata Indica have increased to
32,500, the figure is still a far cry from the 70,000 cars
per annum that is necessary for the project to break even.
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