In what is perhaps the first admission by an original equipment manufacturer (OEM) of automakers' failure to act proactively in the face of a sustained slowdown in sales, leading to inventory piling up to 2-3 times normal levels, Tata Motors in a call with analysts said it had not anticipated such a sharp slowdown in the industry.

"We are not happy with our free cash flows, which was entirely negative. We did not expect the sharpness of the slowdown in the industry. This is because of our inability to accept that the market has come down so drastically," PB Balaji, Group CFO, Tata Motors, told analysts, adding, "we waited to be 100 percent sure before we took any action."

Inventories for passenger vehicles (PVs) had crossed over 50 days and 60 days for commercial vehicles (CVs) in the last quarter, prompting OEMs, including Tata Motors, to rejig production schedules to correct stock pile-up in the face of falling demand and lenders refusing to extend funding limits for rising inventory.

However, dealerships feel companies swung into action too late, as the slowdown had started last year itself, and production should have been adjusted sooner, so as to avoid burdening dealerships with the cost of financing mounting stocks.

Emphasising its strategy to push retail sales and prioritise dealer profitability against the current backdrop, Balaji said Tata Motors' focus will be on market activation, cost reduction and cash flow.

"The time to focus on dealer profitability has never been more ripe," Balaji said, adding that there is a need to provide customised finance solutions for dealers and customers while ensuring they don’t increase risk in the marketplace.

"Our MHCV volumes dropped 30 percent but we've managed to hold on to the EBIT, thanks to Turnaround 2.0," said Balaji, noting that retail growth has been higher than wholesale growth, which is their focus. The company, he said, now wants to look at marketshare improvement.

"In the heavy commercial vehicles, we saw severe liquidity stress and lost competitiveness in the wholesale space" he told analysts.

“Negative operating leverage coupled with low MHCV volumes have impacted our EBIT,” he said.

Speaking about passenger vehicles (PVs), Balaji said the company's strategy will focus on winning sustainability and that cost reduction and an improved product mix have helped it.

Going forward, the firm will look to diversify its sources of funding, keep the guidance for JLR margins between 3-4 percent, while the expectation for standalone EBIT will be "slightly lower" this year and the next. The focus, in both PVs and CVs, will remain on the retail side.

The company reported a doubling of its losses in the quarter ended June at Rs 3,679.66 crore vs a loss of Rs 1,890 crore in the last quarter of FY19.