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Any company looking to expand its revenue base must target related but unchartered territory.

TATA motors, a leader in the MCV (Medium commercial vehicles) and HCV (Heavy commercial
vehicles) segments of the automobile industry, but they did not have much presence in the LCV
(Light commercial vehicles) segment. However, they took the bold step of venturing into this
segment in 2005. Till the launch of TATA ACE, LCV segment was mainly dominated by 3
wheelers. The players in this segment were very complacent. They were mainly playing on
volume, and demand had risen at the annual rate for more than 7% between 1994 and 2005.
There was no innovation in the segment. The 3 wheelers wore a rustic look, was uncomfortable
and not very safe for carrying load at high speed. Though the price was less, ranging from INR
1.2 Lakhs to INR 1.8 Lakhs, the operating cost was very high.
Being aware of changes in macroeconomic environment – Golden quadrilateral project started by
the NDA government has led to creation of large number of expressways and widened many of
the existing highways. This boosted the transportation of the goods by road (a portion of traffic
would move from railways to roads) and pushed the demand for heavy and light commercial
vehicles. But for every HCV of 40 ton capacity transporting goods to a city, 40 one tonne LCVs
will be required to transport those goods within the city. So development of large number of
highways has increased the demand for fast and efficient LCVs. TATA motors identified this
need.
The level of urbanisation had increased. Cities have increased in size and are pushing their
geographical boundaries. Due to increasing size and corresponding congestion, it will be difficult
for MCV or HCV to transport goods within the city. Also demand for transportation of goods within
a city is increasing because of increasing population and growth in the organised retail sector with
the entry of large players. This gave rise to increased demand for LCVs both for intra city
transport, and for transport between rural and urban areas. TATA motors identified these
macroeconomic trends and realized that there will be an increased demand for LCVs in urban
areas.
Addressing not so visible but important issues: TATA motors wanted to reduce their dependence
on the MCV and HCV segments. They started losing their market share in these segments in the
late 90s. Also the sales of MCV and HCVs are highly correlated with economic cycle because of
high prices. Credit payback burden on vehicle owners will reduce with low priced LCVs, and thus
the sales of LCVs would remain unaffected even during economic slowdown. TATA motors
wanted to diversify, augment and de-risk their sources of revenue. The launch of their LCV, TATA
ACE helped in achieving these goals. During the financial meltdown (2008-09), even as the MCV
&HCV segments in India shrank by 33% compared to the previous year, Ace in the LCV segment
fell by just 12%. The moment market conditions improved, the demand for LCVs increased at a
fast pace.
Customer is King – Before the launch of its LCV, TATA motors conducted market research to
identify the customer needs. Customers were asked about the basic attributes which they seek in
an LCV. Some of the findings of this exercise were related to basic needs of transporters, while
some were completely surprising for TATA motors team. The market research team realized that
the customers in rural areas attached prestige to their transport vehicles. People in rural areas
told the research team that people who drive 3 wheelers are not held in high regard in their social
circles. They expressed a desire that if they can afford to drive a 4 wheeler LCV, they will gain
prestige in their social circle. The other attributes desired by the users were safety, comfort to the
driver, speed, ability to drive in the narrow lanes of urban areas, and uneven terrain of villages
and low operating costs.
Product – Most of the customers inputs went into the design of LCV, which TATA motors was
planning to introduce in the market. Major revolutionary change was shift from the 3 wheeler to a
4 wheeler for a LCV. This was done to meet the basic demands of customers, such as the
prestige aspect which customers attribute to their LCV and the safety desired in an LCV. The 4
wheelers are safer than 3 wheelers because of greater balance of the vehicle. Safety features
such as installation of rear view mirror on windshield instead of roof head, gave a clear rear view
to the drivers by reducing the vibration. Operating cost of TATA Ace is much lower than the 3-
wheeler LCVs, as oil needs to be changed only after 9000 KM as against 5000 KM in a 3-wheeler
LCV. The sturdy design meant that there would be very less wear and tear of the vehicle with the
passage of time. Many changes were introduced in the vehicle to increase the comfort level of the
vehicle. Strength of the shock absorber was improved to reduce the impact of shock caused by
uneven terrains. The conveniently positioned gearshift lever and parking brake enhance comfort
in ride and handling. Higher comfort level ensured that vehicles can be driven for longer distance
without causing much inconvenience to the drivers. The design also took into account many other
aspects such as speed and road conditions. In terms of load bearing capacity, the cargo bed of
the Ace was bigger at 2,200X1,500 mm, compared to an average of 1,950X1,450 mm of other
three-wheelers.
Pricing – At a value price point of Rs 220,000, Ace was targeted to attract buyers who would
otherwise buy three-wheelers at price points from Rs 120,000-Rs 190,000. The Company
targeted customers who were willing to pay a higher price for extra value provided to them. Also
the vehicle was designed to reduce the operating cost. The price of Rs 1.80 lakhs was a tough
target to meet for the design team. But rather than focussing on the final pricing, they created a
new benchmark cost/tonne/km. So ACE was priced to give customer better utility on
cost/tonne/km when compared to 3 wheelers.
Positioning – Though the exterior of Ace was very appealing, and its interior were very similar to
that of a car, still ACE was not projected as a sophisticated vehicle. In case it would have been
projected as a sophisticated vehicle it might have been seen as a vehicle which cannot carry
heavy load. It was projected as a vehicle which is reliable, sturdy, and small in size. The small
elephant advertisement amply captured these attributes.
After sales - Tata Motors augmented the service network by providing training to automobile
garages and branded them Tata-certified service points. This has helped the company to have a
sales or authorised service station at every 50-70 kilometres in the states where Ace is sold.
Cost Efficient Production –A number of measures were followed to keep down the production
costs of ACE. The number of components used was kept low, the assembly line was made short,
and around 80% per cent of the Tata Ace components were outsourced. Many of the design
concepts were borrowed from other vehicle platforms of TATA motors, so as to reduce the design
costs. For instance, the design for the headlamps of the Ace was borrowed from the multi-utility
vehicle, Tata Sumo.. Only one colour white is offered. That changed the way it worked with its
suppliers.
Constant monitoring of market needs - Tata Motors has also developed several applications of
the Tata ACE, such as Water Tanker, Delivery Van - Box Type (for high-volume low-weight
cargo), Delivery Van - Bodyline (for precious cargo and courier services), Garbage Tipper,
D'Siltman (for desilting underground drainage and wells), Dumper Placer, and ACE Elevated
Platform. TATA motors has also launched CNG version in metros like Delhi.
Result – TATA motors has sold more than 5 lakh vehicles till August 2010, after its launch in
2005. TATA motors hold more than 65% market share in this segment. The company is planning
to export ACE to other countries.
Lesson for others – From above discussion it has become clear that to successfully launch a new
product, an integrated strategy need to be followed. It must be preceded by studying customer
needs and identifying the gap between current market offering and customer needs. Also while
making a decision about the kind of product to be launched, a firm must also study
macroeconomic trends in the market, and anticipate changes in customers’ preferences. All the
aspects of a marketing strategy such as product, price, place and promotion have to be followed.
You even need to think beyond the current sales and think about after sales service. TATA ACE’s
success also proves that if the customer sees value for money, he will be willing to pay for the
value. Also one must challenge the narrow vision and should devise strategy to be a winner in a
new category.

Tata's Ace mini-truck suddenly gets competition


Sohini Das / Ahmedabad May 25, 2010, 18:04 IST

Mahindra’s Maxximo grabs 24% share in west & north over just 2 months.

The Tata Ace, market leader by a huge margin in the mini-truck segment, may have to
gear up for some competition.

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Sales of the newly launched Mahindra Maxximo have seen a swift rise. Within two
months, the new entrant has managed a 24 per cent share in the western and northern
markets.

Mahindra & Mahindra (M&M) is doing a region-wise launch, starting with the north and
west and entering the eastern markets a month earlier. “With the performance in the west
and north, we had the confidence to launch it in the east. We had good expectations, as it
is a superior product,” says Vivek Nayer, senior vice-president, marketing.
The Maxximo is the first in the segment to be powered by a two-cylinder CRDe engine.
While it offers a higher payload of 850 kg as compared to the 730 kg of the Ace, the
Maxximo BS-III variant is priced at par with the BS-II variant of the Ace, at Rs 2.84
lakh.

Tata Motors’ dealers in Delhi, Mumbai and Ahmedabad that Business Standard spoke to
admitted on condition of anonymity that there indeed had been an impact of the Maxximo
on the mini-truck market, but added that the segment itself had also grown by over 30 per
cent in 2009-10.

The Ace, launched in 2005, offered a solution for last-mile connectivity on goods and has
been a runaway hit. It enjoys 90 per cent market share in the segment. Starting with sales
of about 30,000 units in 2005-06, its footprint more than doubled in 2006-07 to over
70,000 and further grew to over 89,000 units in 2007-08. Even in 2008-09, a year
impacted by the downturn in the commercial vehicles industry, it clocked sales of over
81,000 units.

Tata Motors did not share sales and market share figures. The Ace is, however, reported
to have crossed the 1,00,000-mark to reach 1,10,032 units in 2009-10 sales.

A company spokesperson said: “Tata Motors cannot provide any information now,
pending declaration of the company's financial results on May 27. Ace sales in Q4 of
2009-10 fiscal and March 2010 were the highest-ever monthly and quarterly levels.”

ACTION IN 0.5-T MARKET, TOO

The competition is set to warm up in the 0.5-tonne goods carrier segment as well. M&M
came up last year with what it called a compact truck, the 500-kg Mahindra Gio. It was
priced at Rs 1.67 lakh, close to the price of a three-wheeler, but offered a much higher
payload, compared to the 200-300 kg for the latter.

As a result, Nayer says, the company managed to double its market share in the segment
from 15 to 30 per cent in the second half of 2009-10. Tata Motors is preparing to also
come up with a 0.5-tonne compact truck, codenamed the Penguin, to take on the Gio. The
Penguin is based on the Ace platform and will be targeted at intra-city travel.

In June 2007, Tata Motors had launched the Tata Magic, developed on the Ace platform,
as a comfortable four-wheeler for public transportation. Already a hit in semi-urban and
rural areas, Magic sales in 2009-10 wee close to 49,000 units, a growth of 71 per cent
over the previous year. The company plans to stay ahead of competition by coming out
with the Magic Iris, a passenger carrier based on the Penguin platform.

Asked about passenger variants of the Mahindra Maxximo and Gio, Nayer said: “We
have launched an entirely new platform with the Maxximo and Gi, and would continue to
roll out fresh variants on the same, but a time-frame is yet to be decided.”
Cooper Corp LCV to take on Tata Ace
Swaraj Baggonkar / Mumbai April 15, 2011, 0:00 IST

Engines and component maker Cooper Corporation is looking to launch an indigenously-


developed light truck next year to take on the market leader, the Tata Ace.

The company is looking to tap into the demand pool for four-wheeled products which can
carry a payload of 0.5-1.5 tonne and be extensively used in villages and towns. The
company will spend Rs 130-140 crore as development cost of the light commercial
vehicle (LCV), most of which is developed in-house. The cost of development of its
engines, which the company has developed in partnership with Ricardo of the UK, is
additional. Some aspects related to the vehicle's design and engineering is outsourced.

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Farrokh N Cooper, chairman and managing director, Cooper Corporation said, "We have
completed the work on engine and work on the LCV is on. We are trying to meet the
deadline of the Auto Expo (2012), but the vehicle will be launched only next year."

There will be at least six variants of the LCV, including passenger versions. Another Tata
Motors product, Magic, has the lead in this segment. All products will be branded as
Cooper.

The company has developed a 1.5 litre engine, which has naturally aspirated and turbo
charged variants. The diesel-fired twin cylinder engine can generate peak power of 55
bhp in the turbo-charged model.

The company is setting up a manufacturing facility in Satara, Maharashtra, with an initial


capacity for 20,000 units per annum. This capacity, according to Cooper, will have to be
increased by at least 50 per cent anticipating the spurt in demand for such vehicles.

As part of its expansion plan, the company is also looking to hit the capital markets
before the end of this year to raise a minimum of Rs 150 crore. Most of the proceeds will
be used towards expanding the manufacturing capacity and towards product
development.

"Our growth has been 30 per cent last year and we are targeting a turnover of Rs 500-600
crore in the next two years, aided largely by revenues generated by the engine business.
We will likely file a draft red herring prospectus in the next six months," said Cooper.

The LCV segment has seen interests from most vehicle majors, including Mahindra &
Mahindra (M&M), Ashok Leyland-Nissan, Force Motors, Hindustan Motors, Piaggio and
Asia Motor Works. These vehicle are priced in the range of Rs 2.5-3-5 lakh.

While M&M saw demand for its Maxximo light truck swell to more than 3,000 units,
Ashok Leyland-Nissan recently launched a LCV developed by the joint venture
christened Dost, which would be launched in the second quarter of this year.

Tata Motors sells more than 20,000 units of the Ace and Magic every month.

About five years ago, Tata Motors unleashed a revolution in the low-priced goods carrier
segment in India with the launching of its Ace mini-truck which can be regarded as 'the
Nano of the commercial vehicle segment' here. Now the Ace has become India’s first
'one-lakh' (100,000-unit) nameplate in the segment, grabbing almost 85% market share.
Competitively priced at INR 240,000 (about US$5,420), it has created its own niche.

Launched in May 2005, the Ace notched up sales of about 30,000 units in fiscal year
2005-06, its volume more than doubled in 2006-07 to over 70,000 and grew further to
over 89,000 units in 2007-08.

Even in 2008-09, a financial year hit by a downturn in commercial vehicle sales, the Ace
still sold over 81,000 units. The success of Tata's mini wonder forced rivals to new
vehicles such as Piaggio’s Ape Truk and, more recently, Mahindra & Mahindra's
Maxximo and cheaper Gio.

In fiscal 2009-10, Ace passed one lakh to reach 110,032 units, so far India’s only
commercial vehicle to achieve the milestone. Reasons include a more up-market
appearance compared to the three-wheeled goods carriers offered here and the separate
cab brings driving comfort closer to that of a car and provides more protection than an
open three-wheeler cab.

Tata has steadily expanded the Ace line to add the HT, Ex (with stop-start technology)
and the Super Ace (one tonne).

In June 2007, it launched the Magic, developed on the Ace platform, as a comfortable
and safe four-wheeler for public transport. The Magic is attracting fans in semi-urban and
rural areas and, in 2009-10 sales came close to 49,000 units, up 71% year on year.

Combined, Ace and Magic exceeded 150,000 units last fiscal year.

Tata Ace has created a new mini segment in India. Priced between 2.25 to 3.35 lakhs
INR, the company aims to convert three wheeler users to 4 wheelers. One of the idea that
has made the launch of this vehicle might be that the government policy in India not to
allow HMVs (that are categorized by vehicles weighing above 3 tonnes) to enter cities
after 7 p.m. to reduce traffic jams and pollution. TATA has found the gap in the market
and released Ace. The 700 cc engine delivers a power of 16 hp (12 kW) at 3200 rpm and
a torque of 3.8 m·kgf (37 N·m) at 2000 rpm gives a tough competition to Piaggio's mini
truck (3-wheeler). It has a permissible loading capacity of 750 kg (1650 lb). It also has a
modern cabin compared to its three wheeler rivals. It is best suited for use by villagers in
carrying goods over short distances. The project was headed and executed by Girish
Wagh.

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