How Tata Motors plans to win back the market with its hatchbacks

Mint

23-05-2025

New Delhi: Tata Motors plans to increase the share of small hatchback cars in its overall portfolio to nearly a quarter, up from 19% currently, as it looks to reclaim ground in India's competitive auto market.
Unlike the country's largest carmaker, Maruti Suzuki India Ltd, which remains bearish about the future of small hatchbacks, Tata Motors believes premium offerings in the ₹7-10 lakh range in the segment have potential.
Vivek Srivatsa, chief commercial officer at Mumbai-based Tata Motors, acknowledges that a lack of focus on upgrading products in the hatchback segment resulted in the company losing market share.
'Earlier, customers would start with entry-level hatchbacks and then move to premium offerings. But now, many are directly starting with hatchback cars," Srivatsa told Mint post the launch of Tata Altroz's facelift on Thursday.
With Tiago and Altroz's facelifts in the last five months, the country's third-largest car maker hopes that its share in the premium hatchback segment will double from 12% currently.
In the financial year 2025, Tata Motors' total sales declined by 3% to 556,263 units. Meanwhile, Mahindra and Mahindra's dispatches surged 20% to 551,487 units on the back of strong SUV (sports utility vehicles) sales.
While SUVs dominate the market, Tata Motors still believes the hatchback segment can do well if investments are made in enhancing product quality. Tata's Altroz competes with Maruti's Baleno and Hyundai's i20, among others.
'Post the upgrade of Tiago in January, the growth was around 20% in its sales in the last quarter," Srivatsa noted.
The optimistic guidance of Tata Motors on hatchbacks contrasts with Maruti Suzuki's stance. At a post-earnings press meet, R.C. Bhargava, chairman of Maruti Suzuki, expressed concern over the company's slow growth in the domestic market.
'Unless something changes, the domestic market will remain muted. In this current year, sales of small cars have declined by about 9%. If there is such a decline in the sales of cars that can be afforded by 88% of people earning, how can we expect growth?" Bhargava asked.
Maruti's overall sales in the domestic market grew a muted 3% to 1.9 million units in the last financial year, mostly on the back of an 82% surge in sales to Toyota as part of its partnership. Excluding this, Maruti's growth in the domestic market was around 0.2%.
Hyundai Motor India Ltd also flagged weak consumer sentiment in the market. The South Korean car maker said it will instead focus on 7-8% growth in exports to offset the weak consumer demand. Its sales in the last financial year declined 3% to 598,666.
Also Read: Jaguar Land Rover tariff hit compounds Tata Motors' domestic woes
Going premium
Meanwhile, Tata Motors remains bullish about the prospects in the Indian market and is guiding for about 5% growth, higher than the industry's estimates of 1-2% growth in the current financial year.
'Much of the degrowth in the market has happened in the cheaper hatchbacks. Consumers are expecting a lot more from their cars, which is leading a lot of car buyers to directly jump to premium hatchbacks," Srivatsa said.
The push toward premium hatchbacks is part of Tata's strategy to revive volume growth, especially after net profit slipped 11% to ₹28,100 crore in FY25 from ₹31,800 crore in the previous year.
"Refresh launches of Altroz and Tiago (launched in Q4) will help Tata Motors regain lost market share in hatches, while the launch of Sierra ICE and EV and Harrier EV may strengthen Utility Vehicle share," Elara Capital said in a 14 May note.
The company acknowledged, post the release of the results, that the global environment is challenging. 'Tariffs and related geopolitical actions are making the operating environment uncertain and challenging. The global premium luxury segment and Indian domestic markets are expected to weather this relatively better," Tata Motors noted on 13 May.
Apart from focusing on getting the premium hatchback segment right, the company is also closely tracking the trends in the electric vehicle and hybrid vehicles markets.
'Tata Motors has always believed that hybrids are an old technology. From a sustainability point of view, there are not many advantages. However, if consumer demand picks up, we will have no issue in starting the production of the vehicle," Srivatsa said.
Also Read: Q4 earnings watch: The auto sector is stuck in a profit jam. Why the squeeze?
According to Deloitte's latest global automotive consumer study, only 8% of Indian consumers were interested in pure electric vehicles, while 33% of the study's respondents preferred hybrid cars. Tata Motors' electric vehicle sales declined by 13% in the last financial year to 64,276 cars.
In 2025 so far, Tata Motors share price has declined 4% as compared to the 1.81% rise in Nifty Auto.
"A major concern for the company would be international challenges but a positive is the fact that JLR continues to be profitable. Domestically, the company has to watch out for rising competition eating into its market share," Saji John, senior research analyst at Geojit Financial Services, said.