In order to get out of a non-core activity and cut down on losses, Tata Motors has decided to close down a 100% subsidiary, Concorde Motors, reports Economic Times.
Concorde Motors was setup in the late 90s to handle sales, service and selling spare parts of all Tata Motors passenger cars. The venture is 100% owned by Tata Motors and was set up in partnership with Jardine Motors. As per the ET report, the process of closing down Concorde will be completed by the end of this financial year.
The company has been incurring losses for seven straight financial years with accumulated losses mounting to over Rs 366 crore.
Interestingly, the regular dealers appointed by the company in the cities where Concorde Motors operated felt the company was eating into its own business. The decision now to close Concorde Motors has helped the dealers get more business. Wherever the dealers wanted the facilities, have been handed over to them.
There were 34 showrooms and 17 workshops in all and as many as 2,200 personnel were employed. And as per the report, most of them are in final stages of liquidation.
Tata Motors’ rival Maruti Suzuki Motors is in the process of setting up its own dealership outlets in many cities for which an amount of Rs 1,500 crore has been set aside. The company has received feedback from many of its dealers that real estate is getting to be quite expensive for them and is eating into their profitability. The slowing down of the car sales in the past year or more would have had a further effect on this.
ET reports some people in the know as saying that there were multiple challenges with a corporate running a dealership. That included issues of governance, which led to costs increasing.
A study of the annual reports of Concorde Motors for the past several years reveal that the company’s revenue definitely grew at around 12% and the last annual turnover figure stood in FY 2019 at Rs 1,215 crore. The last year the company made profit was in FY12, where a meagre Rs 0.70 crore was recorded as profit. Since then it has only been reporting losses.