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Tata Motors embarks on major belt tightening exercise to tide over declining revenues

Anticipating rough road ahead, Tata Motors, country's largest vehicle maker, has embarked upon a major belt tightening exercise, to tackle dwindling demand for its key commercial vehicles business. Towards this development, the company has urged departments to reduce spend and to rationalize travel, stay and even restrict production operations and certain spends on product development.

However, given the seriousness of the current business scenario, the measures are not just limited to Indian operations, but even international subsidiaries like Tata Motors Thailand are undertaking austerity measures to prune down expenses.

Further, even the auto major has embarked upon periodic block closures across plants, due to dwindling demand for heavy and light commercial vehicles across the industry. Plant closures have become a recurring feature, with most factories now functioning on a five-day week, against seven-day week earlier.

Moreover, although reporting intact domestic numbers for the commercial vehicle division, the contribution of Medium and Heavy Commercial Vehicle (M&HC) has been declining. Substitution of M&HCVs by small commercial vehicle segment has mainly hit margins and the cash condition of the company.

Tata Motors registered a 13.43% fall in its total sales (including exports) at 66,500 vehicles for the month of November 2012 as compared to 76,823 units sold during the same month a year ago. The company's sales of commercial vehicles in November 2012 in the domestic market were down by 0.91% at 44,323 vehicles, compared to 44,732 vehicles, sold in November last year, while sales of light commercial vehicle (LCV) for the month under review coming at 34,828 vehicles, stood up by 21.46%, over 28,673  vehicles, sold in the same period last year. Meanwhile, the medium and heavy commercial vehicle sales (M&HCV) fell to 9,495 units (16,064). Cumulative sales of commercial vehicles in the domestic market for the fiscal were at 342,855 units, cumulative LCV sales were at 243,543 and M&HCV at 99,312 units.

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