Tata Motors logos are pictured outside their flagship showroom in Mumbai
Tata Motors, the biggest company in the Tata group in revenue, on Friday said it does not supply Nano gliders to an electric car maker where Ratan Tata has a stake. Reacting to observations made by former chairman of Tata Sons, Cyrus Mistry, after his removal, the company admitted that Nano has been a loss-making product but argued that the investments in the Nano factory could be used for making other products. The same has been demonstrated by production of Tiago, it added.
Mistry had further claimed that shutting the Nano business "would stop the supply of the Nano gliders to an entity that makes electric cars and in which Tata has a stake". Tata Motors on Friday said the matter is in a preliminary exploratory stage and no agreement for supply of gliders has been concluded.
In a statement to the stock exchanges, the company said that while investments in the Nano plant were made to produce 250,000 units a year, the volumes did not materialise. "Due to a combination of several factors, including project delays and change in the location of the factory, and the perception of (Nano) being a 'low-priced' car, the volumes initially anticipated did not materialise and utilisation of capacities are significantly lower. In a highly price-sensitive segment of the market, coupled with low volumes, it has been a loss-making product," it said.
Indicating the future plans for the domestic passenger-vehicle business, the company said it had recently laid down a future product and business strategy that refocuses on growing the attractive segments of the business. It said the strategy had been approved by the board. Tata Motors is the fourth-largest passenger vehicle maker in the country after Maruti Suzuki, Hyundai, and Mahindra and Mahindra.
Mistry has said the Nano product development concept calls for a car below Rs 1 lakh, but the costs were always above this. "This product has consistently lost money, peaking at Rs 1,000 crore. As there is no line of sight to profitability for the Nano, any turnaround strategy for the company requires shutting it down," Mistry had said in a letter to the Tata Sons board last week. He cited "emotional reasons" as the factor that had kept the company from shutting the Nano business.
Tata Motors said the development cost and investments in Nano-specific dies and toolings have been significantly written off in line with the accounting policies.
Coimbatore-based electric vehicle manufacturing company Ampere Technologies, that holds investments made by Ratan Tata, had earlier denied that Nano gliders were supplied to them.
Mistry had also claimed that prior to 2013, Tata Motors Finance extended credit with lax assessment to shore up sales and market share. This caused the non-performing assets (NPAs) to expand to Rs 4,000 crore. The company today said that the credits were extended to the entry level segment and first time users since the segment was severely impacted by business and macroeconomic downturn in the previous years. The company added that full provisions were made for these and no future provision is expected.
On the charge that the company resorted to 'aggressive accounting' to capitalize substantial proportion of the product development expenses that create a future liability, Tata Motors said its accounting policies are in compliance with the relevant accounting standards and are regularly reviewed by the audit committee and statutory auditors.