Tata Motors looking to minimise discounts in truck segment

Commercial vehicles market leader Tata Motors is looking to minimise the practice of discounting that has plagued the industry, eroding margins of market leaders, said a top executive and multiple people in the know.

The company has reduced the level of discounts it offers on its trucks in the past few months. At the beginning of the year, it did not hike the maximum retail price of its trucks as is the industry norm, instead reduced the level of discounting to increase the effective market operating price.

“From September onwards, we have taken a decisive step. We are moving from a push system to a pull system,” Girish Wagh, executive director at Tata Motors, told ET. “The journey has not been easy. The customer’s mindset has become like that. We are spending time on communication with customers, financiers and channel partners.”

Industry watchers said Tata Motors has sharply reduced the level of discounting in market sub-segments where it is the leader. However, discounting persists to an extent in the segments where it is not the highest seller.

Meanwhile, the company’s top rival Ashok Leyland has maintained the level of discounts it offers, said people in the know. This has led to Tata Motors losing some market share.

“We lost some share initially, but we are confident that we get it back by the year end,” Wagh said.

In response to ET’s emailed queries, an Ashok Leyland spokesperson said the company has always been a proponent of offering long-term value to its customers as against increasing market share on the back of deep discounts. “For Ashok Leyland products, level of discounts has been reduced consistently over last five quarters which has resulted in better realisations over this period. This has resulted in better controls on margins despite extended impact of inflated commodity prices in the first half of last calendar year,” said Sanjeev Kumar, president and head of MHCV business, Ashok Leyland.It was the competition between the companies for market share that sparked the current practice of heavy discounting in the medium and heavy commercial vehicles industry.

The change in Tata Motors’ stance on discounting comes after the company’s margins remained thin despite it selling more than one in every two medium and heavy trucks in the country. Last year, the company brought on board global management consulting firm McKinsey & Co to restructure its CV business for better profitability without compromising market share, ET reported in July.

The country’s largest CV maker is keen to stop getting into a discount war that put it among the weakest performers in terms of bottom line in 2021-22 even while it gained market share.

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