Efforts by Tata to boost penetration in Africa will be backed by assembly operations in the region.
IHS Automotive perspective
Africa is a focus market for Tata Motors, especially its commercial vehicle (CV) business. IHS Automotive interviewed Rudrarup Maitra, head of Tata's CV business in international markets, to gain an understanding of the automaker's strategy in the region.
Africa currently accounts for 17–18% of Tata Motors' CV exports, a figure that the company hopes to boost to 25% over the next five years. Tata's expansion in Africa will be backed by local assembly operations.
Given the nature of demand in the market and Tata's vast experience in the development of low-cost vehicles and technologies, Africa is a natural destination for the automotive group, which sells CVs under the Tata and Daewoo brands. The prospects for an assembly facility are brightest in Nigeria, where the government is encouraging investment in local operations.
Tata Motors – India's largest commercial vehicle (CV) player – has been gradually expanding its presence in Africa in recent years. Apart from having boosted its retail sales presence, the automaker has been increasing assembly operations in various parts of Africa. IHS Automotive recently interviewed the leadership team at Tata Motors to find out more about the automaker's plans to make India an export hub, introduce new transmission technologies, and boost sales. Below are excerpts of our interview with Rudrarup Maitra, head of Tata Motors' commercial vehicles business unit, international business.
IHS Automotive: Please tell us about Tata Motors' presence in the African market.
Rudrarup Maitra: Africa is one of the growth markets [where] we have [a presence] in terms of focus, strategy, and that has been the case for quite some time. In Africa, we are represented by our partners on the ground and that includes different organisations. Tata Africa, which is a subsidiary of Tata International, is our distribution partner in more than 11 countries in Africa. They distribute the entire [line-up] of Tata Motors commercial vehicles in Eastern, Southern, and Western Africa.
We have recently entered the Tunisian market. We are also present in Angola, DRC [Democratic Republic of Congo], Ethiopia, and Sudan through separate partners. We have an assembly plant in South Africa which is at Rosslyn near Pretoria. We have assembly tie-ups in Senegal, Kenya, Nigeria, and Tunisia, for specific products.
IHS Automotive: What sort of sales volumes is the automaker generating in the region?
Rudrarup Maitra: Roughly, we do around 7,000–8,000 units [annually] in Africa and we see this number growing. This represents around 17–18% of our exports out of India, which is quite a significant number. We intend to take it up to at least 25% of our exports over the next five years. Our exports to Africa start from the small commercial vehicles category [right up] to medium and heavy commercial vehicles. Of the total exports to Africa, approximately 55% is intermediate, medium and heavy commercial vehicles [including both trucks and buses].
IHS Automotive: In terms of the nature of demand, what kind of challenges does the African market pose?
Rudrarup Maitra: Africa is a sub-set of many countries with different requirements. The South African and the Maghreb customer requirements are closer to [those] of customers in the European Union. The requirements in many sub-Saharan countries is akin to those of South Asia. The requirements differ in each country with respect to after-sales, price points, specifications, euro norms, etc. To say that Africa receives vehicles that are similar to those required in South Asia is a bit of a generalisation, as the African customer is also used to buying a lot of second[-hand] vehicles from Europe as well as Japan. Hence, the product expectation of the end customer is set to a relatively high benchmark, which for some categories is higher than those products sold in South Asia.
The advantage that Indian companies have in Africa, especially in sub-Saharan Africa, is that being [from] a developing country ourselves we are better able to understand the requirements of customers in developing countries.
We recently launched the Tata Prima as well as the Tata Prima LX range in Africa and we have met with some very interesting responses starting from South Africa to Kenya to Uganda. We are now busy launching these products in West Africa. We find that there are segments or niches for these products that we have a definite play in for being well built, rugged, having refined cabin ergonomics, and for being visually appealing.
We also cater to a wide range of customer segments, from large fleet owners to one-time buyers, but they are all conscious and expectant of comfort and safety features in the vehicles that they purchase.
IHS Automotive: Can you put some figure on Tata's retail presence in Africa?
Rudrarup Maitra: In smaller countries, we normally have 5–20 customer touch points; in larger countries, it would be upwards of 20. In markets like South Africa, it can go upwards of 80 as well. In total, Tata Motors has over 200 customer touch points across the African continent, currently.
Outlook and implications
With a share of more than 50% in the medium and heavy CV market in India, Tata Motors is rightly looking at overseas destinations to boost sales volumes. Given the nature of demand in the market and Tata's vast experience in the development of low-cost vehicles and technologies, Africa is a natural destination for the automotive group, which sells CVs under the Tata and Daewoo brands. In due course, these sales efforts will be complemented by manufacturing and assembly operations. As of now, the automaker's assembly operations in the region are limited to South Africa, where it assembles light, medium, and heavy commercial vehicles. However, there are efforts under way to assemble CVs in other parts of Africa, as mentioned above. The prospects for an assembly facility are brightest in Nigeria, where the government is encouraging investment in local operations. The plan also makes sense for Tata Motors geographically, by spreading its operations across various parts of Africa through a "hub and spoke" model.
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