Tata Motors Consults McKinsey To Boost Profits Of Its CV Business

The globally acclaimed automobile manufacturer, Tata Motors has consulted McKinsey & Co, global management and consulting firm, to completely restructure its commercial vehicle (CV) business in India. It has been reported that the automaker has decided to reconstruct its CV wing for better profitability. Tata Motors has asked to not compromise its market share in order to build a better map for near future profits. 

According to media reports, it has been mentioned that Tata Motors is not looking to go into war with competitors, in terms of discount sales since it would make them one of the weakest performers in 2021-22 despite regaining its market share. 

Further, the mandate would mean that McKinsey & Co will be considering tweaking and restructuring the pricing, considering financial margins and expansion of international business of Tata Motors’ commercial vehicle wing in what appears to become a year-long association between the two companies. 

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As for McKinsey & Co, they have clients who are competitors in the trade and have been serving as a consultant and management group for numerous homegrown brands like Tata Motors according to sources like ‘ ‘The Economic Times (ET)’, a famous news and media firm. 

Moreover, it has been stated by the news organisation that sources have stated that top management, including the chairman, has stressed the need to end the discount culture and emphasised maintaining and gaining market share in the automotive sector, especially the CV segment. 

A company spokesperson has mentioned to ‘The Economic Times (ET)’, “Like most progressive organisations, we engage with external consultants and experts as and when needed to bring in new knowledge and perspectives that help accelerate our pursuit of excellence.”

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It has been cited that Tata Motors’ cumulative market share figures have grown to 44.9 per cent in the financial year 2022 (FY2022) from what was believed to be 42.4 in the financial year 2021 (FY2021). However, reports suggest that the profitability has dipped by 50 basis points even as other segments grew significantly. 

Furthermore, Tata Motors’ Commercial Vehicles business marked a loss before tax of Rs 100 crore in Financial Year 2022 (FY2022), while Ashok Leyland NSE 0.45 per cent, attained a profit before tax of Rs 542 crore. 

Another Tata Motors’ official has mentioned to “The Economic Times” that “It’s a classical conflict between funding market share growth and driving profitability. The CV business unit is unable to leverage technology or product superiority to command profitable selling prices and instead is relying on active discounting to retain or grow share, which is proving unsustainable.”

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