Will Tata’s Curvv ball strike out Hyundai?

“In my pursuit of minimalistic and simple living, I have turned desi now. Stopped buying foreign cars, watches and other luxuries. World class Indian products are available now. Started with my Tata Safari, next would be Mahindra,” Oswal wrote in the post on X.

Oswal is just one of the tens of thousands of consumers who have turned to Tata Motors Ltd in the frenzy to buy products made by homegrown companies. The company has unabashedly touted this shift while marketing its cars—a ‘vocal 4 local’ sticker adorns each of them. Along with other factors, the move has paid rich dividends.

Since 2020, Tata Motors has witnessed a stunning turnaround in fortunes in the domestic market—almost doubling its share and more than trebling absolute sales. Aided by a new design language and some technical support from Jaguar Land Rover, its British subsidiary, it has resuscitated an ageing and uninspiring brand and successfully exploited the market’s clamour for SUVs. In the process, it has not only overtaken Mahindra & Mahindra Ltd to become the third-largest passenger vehicle maker in the country but also edged closer to Hyundai Motor India for the No. 2 spot—a position it lost more than 15 years ago.

In the biggest sub-segment of the industry, the sub-4-metre SUV space, which accounted for a fifth of the overall market—717,408 units—in 2022, Tata’s Nexon was head and shoulders ahead of Hyundai’s Venue, leading by nearly 50,000 units. Similarly, creating a new micro-SUV segment with the Punch in 2022 gave it additional volumes of nearly 130,000 units. Basking on these successes, it came within sniffing distance to Hyundai in 2022, with less than 26,000 units—around 18 days’ worth of sales for either carmaker—separating them.

But catching up is one thing, overtaking is quite another and Tata Motors is beginning to realize that. In 2023, the Korean carmaker counterpunched with its own micro-SUV, the Exter. While it did not slow down the Punch’s momentum too much, the Exter brought additional volumes to Hyundai’s kitty. The Exter was the eighth largest selling passenger vehicle in the country in 2023, selling nearly 50,000 units in less than six months.

Tata had a relatively quieter year with no new additions to its portfolio, which meant its growth of 4.6% lagged that of the overall industry. As a result, Tata lost market share for the first time in four years. And Hyundai was one of the companies that gained. Has Tata missed its chance or does it have an ace up its sleeve to reclaim the second position?

Curvv ahead

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Last year, Hyundai sold over 150,000 units of the Creta, registering growth of 12% over 2022. This explains why Tata, for all its success in other segments, has not been able to catch up with Hyundai.

While Tata Motors has a strong and relatively fresh product lineup that covers much of the segment, there is one glaring gap; it still lacks a mid-sized SUV that sits between the Nexon and Harrier. This is the second biggest sub-segment of the market, accounting for over 500,000 units in 2023, offering a similar rate of growth as the sub-4-metre segment (where the Nexon rules). But it is far more competitive, with the likes of Skoda, Volkswagen and Honda, of late, also jostling for space.

The long-time segment leader here is the Hyundai Creta. Last year, Hyundai sold over 150,000 units of the Creta, registering growth of 12% over 2022. This explains why Tata, for all its success in other segments, has not been able to catch up with Hyundai. And this is what it hopes to do in 2024 with the Curvv SUV.

“We aspire to grow faster than the market because we are adding new products this year. We had a big challenge in the last two years, where we didn’t have a new product,” Shailesh Chandra, managing director of Tata Motors’ passenger vehicles and passenger EV divisions, told Mint.

This will also be the year the industry is expected to see growth taper to around 5% after making big strides over the past three years. The addition of the Curvv to Tata Motors’ portfolio will add to the company’s volumes, but will it be enough to help it overtake Hyundai? Analysts are divided.

“The Curvv is entering a hyper-competitive segment with all automakers having offers, from a Maruti Suzuki to a Citroen (French auto brand). I do not see it really shaking up that segment,” said Avik Chattopadhyay, co-founder and partner, Expereal, a brand strategy consulting firm. “It will be yet another offer but the actual battleground for Tata lies a couple of price bands below.”

Himanshu Singh, research analyst at brokerage house Prabhudas Lilladher, projects 5% growth—at a shade under 600,000 units—for Tata in the next fiscal year, ending March 2025. That would still put Hyundai, which sold over 600,000 units in 2023, ahead, unless it suffers an unexpected decline.

“Market growth will be a big determinant of market positions, unless we see larger swings in distinct customer segments of each brand, which is unlikely since both are competing in almost similar segments,” said Ashim Sharma, senior partner and group head, Nomura Research Institute, a consulting firm.

The electric edge

Shailesh Chandra, managing director of Tata Motors’ passenger vehicles and passenger EV divisions. The company aspires to grow faster than the market this year on the back of new products, he said.

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Shailesh Chandra, managing director of Tata Motors’ passenger vehicles and passenger EV divisions. The company aspires to grow faster than the market this year on the back of new products, he said.

If the lack of a mid-sized SUV represents a gap in Tata Motors’ portfolio, Hyundai and much of the industry are yet to actively participate in the electric vehicle (EV) story in India. The Korean carmaker does have two electric SUVs—Kona and Ioniq5—but they come with a price tag well over 20 lakh, and are not mass-market products.

Tata Motors has taken a definitive head-start here with the launch of electric versions of the Nexon SUV, Tigor compact sedan and Tiago hatchback. Last month, it followed this up with the electric Punch. Later this year, electric versions of the Curvv will be launched before the petrol and diesel versions; the Harrier, too, will see an EV launch. Though the volumes are relatively small, they do add to Tata’s tally—in 2022, electric vehicles brought nearly 45,000 additional units to Tata’s total. In 2023, this increased to almost 70,000 units.

“For EVs, we have seen growth rates really get triggered by new models at a more affordable price. Last year, average price points for EVs were around 17-18 lakh, with the Nexon being the leading product. Then, in January (2023), we launched the Tiago, which generated a lot of volume growth from its affordable price point (sub- 10 lakh),” said Tata Motors’ Chandra.

Yet, the growth is not as strong as the company had initially predicted. In the middle of the year, Tata had said it was targeting volumes of 100,000 units from EVs in fiscal year 2024, which ends next month. At the current rate, even with the addition of the Punch EV, it is likely to fall short by at least 20%. Considering Hyundai still has no presence in these segments, stronger growth by Tata would have narrowed the gap between the two.

“What is stopping people from buying an EV as a first car is primarily bottlenecks around charging. And things which are going to really help that aspect be overcome are…higher-range vehicles…once you cross a real range of 400 km, charging anxiety will come down,” Chandra told Mint last month. “That will give people the freedom to own a car, which is not limited to city use but can be used for inter-city drives. That should lead to increased adoption.”

Range anxiety continues to be one of the biggest concerns for prospective EV buyers and though Tata has an over 70% share in this segment, it is still grappling with the ideal battery range that will make EVs mainstream. In 2019, Chandra had hoped it would be at 220 kilo metres.

“The biggest challenge here is the pace at which the charging infrastructure is growing. It is lagging behind the pace at which the EV adoption is happening,” he said at an investor conference call on 3 February.

Other players, including Hyundai, are planning to launch their localized mass-market EVs from next year. That is when the window of opportunity for Tata to use EVs to close in on Hyundai will begin to narrow.

“On safety and EVs we are late but we will catch up. We underestimated the EV market and others took the lead,” said Tarun Garg, chief operating officer at Hyundai Motor. “Let’s not read too much into the first-mover advantage. The market will change when others join the fray. We are localizing the components and battery packs, and from 2025 onwards you will see our mass market electric cars in the market—2026 will be a very competitive year for EVs in India,” he added.

Tata has also outflanked Hyundai in compressed natural gas (CNG), which is again a segment growing faster than the overall market, recording 25% growth in 2023.

Tata has four CNG models in India—Tiago, Tigor, Altroz and Punch, while Hyundai has three—Grand i10 Nios, Exter and Aura. In the first ten months of fiscal year 2024, Tata overtook Hyundai to become the second largest CNG carmaker in the country, with sales of 64,972 units against Hyundai’s 41,806 units. In fiscal 2023, Hyundai had sold 49,477 units to Tata’s 36,963 units.

The Tata company is looking to exploit this segment further. Last week, it launched India’s first CNG cars with automatic transmission and is set to follow this up with a CNG version of the Nexon.

“Tata needs to build its customer base as quickly as possible before Maruti Suzuki and Hyundai release their volume electric cars. Then there are Mahindra, Toyota and a resurgent Honda, too,” said Chattopadhyay of Expereal. “The next 18 months are critical for Tata to build both volumes as well as goodwill. It will eventually have to give up the (EV) crown to someone else.”

Does No. 2 matter?

While both companies officially play down the importance of their respective rank in the market, there is no denying that it matters a lot. Tata and Hyundai started their journey in India’s domestic car market around the same time, in the late 1990s—the Indica and Santro were launched within six months of each other. But thereafter they took divergent paths. Tata went big on diesel and utility vehicles, while Hyundai focused on compact cars.

In the passenger car segment, which doesn’t include SUVs, Hyundai was ahead from the outset. But in the passenger vehicle segment (which includes SUVs and vans alongside cars), Tata was ahead till 2007.

With market-leader Maruti miles ahead and almost unreachable, for either Tata or Hyundai to gain more ground would be a significant morale booster.

“Everybody will have aspirations. Ours being number 2 is not only dependent on us but by what others do, as well. It will be a blow if we lose that position but that is not going to happen. If positions start changing because of one or two products, then we will see them change every year. It doesn’t happen like that,” said Garg.

Tata doesn’t hide its aspirations either. In its Q3 investor presentation, for instance, the fact that it has become the No. 2 player in the market by vehicle registration data finds a prominent mention (the traditional industry practice is to report wholesale data or vehicles despatched by companies to dealers).

In the 2 February investor conference call, Chandra also referred to registration data in the last quarter of 2023 to state that Tata had beaten Hyundai to the second position. It does rankle Hyundai, though the Korean company has given up on its longstanding ambition of sustaining 20% share in the market.

“We have been around for 25 years. One or two months should not be a reflection of the actual position of a company in the market. Among the top three manufacturers, our growth has been the highest this year. And we have gained market share,” Garg added. “20% market share is unrealistic. Let’s not go after it. Hyundai and Kia are the only companies in the Indian market that can bring global technologies. That is what we are aiming to do. Market share will follow.”

Does the moderation in Tata’s growth indicate it does not have the legs to outlast Hyundai? Or will Curvv prove to be the springboard for its next round of strong growth? While it chases Hyundai, it also needs to be wary of Mahindra, which gained the maximum share among all the major players in 2023. “The story is not just about 2024. With its strong product lineup, Tata will continue to push Hyundai. It may not overtake it in 2024 or 2025 but if it can sustain what it has done in the last three years, it will compete strongly for the second position,” said Singh of Prabhudas Lilladher.

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