Tata Motors looks to revive Ace’s legacy with even smaller truck

5 minutes of reading Last updated: August 6, 2024 | 18:06 IST

India’s largest commercial vehicle manufacturer Tata Motors is considering launching a first-of-its-kind sub-600 kg small commercial vehicle, positioned just below the flagship Tata Ace, as it sees an opportunity in the last-mile connectivity space, which is seeing strong demand from e-commerce players.

The brain behind the disruptive Tata Ace small commercial vehicle that has revolutionised last-mile deliveries in the Indian market since its launch in 2005, Girish Wagh, executive director, Tata Motors, tells Business Standard that, “In e-commerce, hub-to-hub transportation is done by 19-tonne medium commercial vehicles and some also use 28-tonne, which are three-axle trucks. But in the last mile, it is a smaller vehicle. We decided to leverage this demand with a four-wheeler (as opposed to the few three-wheeled commercial vehicles currently in use in the industry) which will have a payload capacity of less than 600 kg. Right now, we are starting with a 600 kg vehicle (Tata Ace) to provide last-mile connectivity.”

He further adds, “Ace is a platform and a product that we have already started with a payload of 600 kg upwards. We will also explore the space below that. We are exploring what we can do, especially with the growth of three-wheelers, specifically with electrification; there are some interesting opportunities in the space below Ace (below 600 kg).”

Wagh admits there is a “need gap” in this space. “But we won’t bring a three-wheeler here – because a four-wheeler is safer and it’s also right for our brand.”

Tata Motors did not reveal any details about the launch date of the new vehicle as it is still in the “planning and development” phase.

In 2005, Tata Motors pioneered the small commercial vehicle industry with the launch of the Tata Ace, which revolutionized last-mile delivery in the Indian market. Since its launch, the Tata Ace has partnered with over 2.3 million entrepreneurs and is the largest commercial vehicle brand in the country.

The idea of creating the Tata Ace came in 2001, when 29-year-old Wagh wanted to enter the sub-2-tonne market, which was then dominated by three-wheelers made by Bajaj Auto, Mahindra and Mahindra and Piaggio.

The upcoming four-wheeled small commercial vehicle (SCV) weighing less than 600 kg is likely to dominate the three-wheeled vehicle market.

“Three-wheelers were stagnating in BS 4 and were shifting to four-wheelers, which was driving Ace volumes. However, during the transition from BS 4 to BS 6, while Ace had a 30 per cent price hike, the price hike in the three-wheeler segment was only 15 per cent. So some buyers started moving back to three-wheelers,” says Wagh.

In the SCV segments — mini trucks, small pickups and large pickups — the main challenge in terms of demand growth is currently the mini truck segment, where prices have gone up by about 30 per cent during the transition to emission norms. Ace diesel, which accounted for almost 70-75 per cent of Tata Motors’ portfolio in the BS 4 era, has lost volume. “We proactively introduced Ace petrol, CNG and now EV. But that has not compensated for the volume loss that has happened there,” says Wagh.

Hence, Tata Motors plans to revive its SCV portfolio through a multi-pronged approach. Its market share in the SCV segment declined from 35.6 per cent in Q1FY24 to 33 per cent in Q4FY24.

One of the priority areas of focus is solving the problem of access to finance for first-time buyers.

Apart from the price hike due to BS 6, the Covid-19 pandemic has hit, leading to a lot of NPAs in the mini truck segment, says Wagh. “As a result, financiers have backed off and become cautious. Financing still remains a bit cautious and they don’t want NPAs. Even our in-house financing, Tata Motors Finance, which was 35-40 per cent of our small vehicle (financing) portfolio, has actually come down to 15-16 per cent of the portfolio,” he explains.

“We are working with financiers to solve this problem and how to grow the market. This is a major bottleneck that we need to do, and this will lead to an increase in volumes,” he added.

In addition, Tata Motors has initiated a front-end transformation project. They have done a thorough analysis of what customers want and what the pain points are and have now developed an approach to offering products for targeted segments and end-uses. The sales focus has fundamentally shifted from B2B to B2C.

The company has also started taking mechanics under its wing, training them and making them part of its extended network. Pre-BS 6 vehicles were easy to repair even by roadside mechanics, which has changed with the change in technology. “We have started a pilot in Maharashtra. We are making them (mechanics) part of our extended network so that access to servicing becomes easier for our customers,” says Wagh. The company will now be closer to the SCV buyer in terms of service experience.

First published: August 6, 2024 | 18:01 IST