Will Zest, Bolt be a game-changer for Tata Motors?

Written By Unknown on Jumat, 18 Juli 2014 | 23.25

Moneycontrol Bureau

Analysts at Citi recently visited  Tata Motors' plant in Pune to test drive the upcoming offerings from the company, Zest (compact sedan) and Bolt (hatchback) and drove away impressed.

Tata's market share has come off steadily over the past several years, which analysts and auto experts attribute to an aging line-up of vehicles, perceived issues with quality of products and a dealership network that fails to inspire confidence.

The company, which used to consistently find a place among the country's top-five auto manufacturers, slipped to the sixth position (behind Maruti Suzuki, Hyundai, Honda, Mahindra and Toyota), notching up sales of 7,911 units in June compared to 11,804 in the same month last year.

Its market share stood at 3.72 percent when 10 years ago, it used to be around 17 percent.

In a recent meeting , Tata Group Chairman Cyrus Mistry said the company was at an inflection point and said it would work on a strong product pipeline of new technologies keeping in view the changing market.

The sense of urgency is visible from the news coming out from the Tata stable: both the Zest and Bolt come with a refreshed design, sporting an indigenously-developed Revotron petrol engine while the diesel variant of the Zest will sport an automated-manual-transmission gearbox found in the successful Maruti Celerio.

Tata, which has thankfully found some respite from the impressive turnaround at British subsidiary Jaguar Land Rover, is banking on the two new upcoming models in a big way to turn around its fortunes in the domestic market.

"We test drove the three versions of Zest – petrol with Revotron, diesel manual and diesel AMT. The company has made significant efforts at improving the look-and-feel as well as technology," Citi analysts wrote.

"New models and technology should counter the negative image consumers have about Tata Motors cars. Also fairly critical - and more challenging - in our view is the revamp of the dealer network; the customer experience hasn't been on par with what customers receive in dealerships of competing OEMs."

The carmaker recently hired 3,000 people to prepare for the big launches and has given a spruce-up to its dealership network.

The pricing of the Zest, since it will be pitted against the Dzire and Amaze, will be at competitive, but accretive, price point, Citi said.

The brokerage has a 'Buy' rating on the stock, predicated on its positive stance on JLR but points out that an improvement in the domestic cars business could help to stem the losses of Tata Motors' parent business, which would eventually result in its re-rating.

"It promises to be an exciting second half [of the year] for the company's car business."

Tata Motors stock price

On July 14, 2014, Tata Motors closed at Rs 456.25, up Rs 10.75, or 2.41 percent. The 52-week high of the share was Rs 484.05 and the 52-week low was Rs 272.50.


The company's trailing 12-month (TTM) EPS was at Rs 1.04 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 438.7. The latest book value of the company is Rs 59.58 per share. At current value, the price-to-book value of the company is 7.66.


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