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giant. TATA Motors in particular. We have analyzed Indian automobile indu stry using Porter‘s 5forces model & its performance in the recent past. Particular ly we have tried to track the path of TATA Motor‘s expansion of international busi ness in the recent past, at present as well as its future plans. We have also di scussed the impact of current financial meltdown on the recent international ven tures of the company. The company is rapidly increasing its global footprint and is aiming to match the standards of international automobile manufacturers in n ext 3 to 5 years. This rise to the level of a world-class automotive manufacture r would involve a large quantifiable increase in revenues from outside India wit h a focus on certain foreign markets. Currently international business contribut es 18.4% to company‘s revenues. Company is aiming to increase it by 200% in near f uture to reduce its dependence on one single economy and one single business cyc le. This ambition of the company has led to numerous joint ventures and increase d activity in countries like the U.K., South Africa, South Korea, Thailand, Braz il and Spain, as well as the company is listing on the NYSE. With the recent acq uisition of Jaguar Land Rover (JLR) from the Ford Motor company in early 2008, t he company has entered into the world of high-end luxury brands. Customers of hi gh-end luxury brands value image and exclusivity factors, while image and exclus ivity conflict with the proposition of TML‘s other recent venture, the inexpensive Nano. In this manner, the decision to compete in both the high-end luxury and l ow-end economy markets certainly creates a big and audacious task ahead for TML. If proven successful, this strategy would provide the company with high margin (JLR) as well as high volume (Nano) revenues. These two revenue streams, if prov en compatible, could mitigate each other‘s risks.
Indian Automobile Industry Hailed as the industry of industries‘ by Peter Drucker, the founding father of the study of management, in 1946, the automobile industry had evolved continuously w ith changing times from craft production in 1890s to mass production in 1910s to lean production techniques in the 1970s. The automotive industry in India grew at a computed annual growth rate (CAGR) of 11.5 percent over the past five years , the Economic Survey 2008-09 tabled in parliament on 2nd July‘09 said. The indust ry has a strong multiplier effect on the economy due to its deep forward and bac kward linkages with several key segments of the economy, a finance ministry stat ement said. The automobile industry, which was plagued by the economic downturn amidst a credit crisis, managed a growth of 0.7 percent in 2008-09 with passenge r car sales registering 1.31 percent growth while the commercial vehicles segmen t slumped 21.7 percent. Indian automobile industry has come a long way to from t he era of the Ambassador car to Maruti 800 to latest M&M Xylo. The industry is h ighly competitive with a number of global and Indian companies present today. It is projected to be the third largest auto industry by 2030 and just behind to U S & China, according to a report. The industry is estimated to be a US$ 34 billi on Industry. Indian Automobile industry can be divided into three segments i.e. two wheeler, three wheeler & four wheeler segment. The domestic two-wheeler mark et is dominated by Indian as well as foreign players such as Hero Honda, Bajaj A uto, Honda Motors, TVS Motors, and Suzuki etc. Maruti Udyog and Tata Motors are the leading passenger car manufacturers in the country and India is considered a s strategic market by Suzuki, Yamaha, etc. Commercial Vehicle market is catered by players like Tata Motors, Ashok Leyland, Volvo, Force Motors, Eicher Motors e tc. The major players have not left any stone unturned to be global. Major of th e players have got into the merger activities with their foreign counterparts. L ike Maruti with Suzuki, Hero with Honda, Tata with Fiat, Mahindra with Renault, Force Motors with Mann.
the market is less competitive (closer to a monopoly).000 units in 2007-08 world's the GDP 2002-03 Exports top 15 automakers • Entry o • Production of four wheele to 23 lakh units in 200 increased from 84. If rivalry among firms in an industry is low. the industry is considered to b e disciplined. A low concentration rat io indicates that the industry is characterized by many rivals. none of which ha s a significant market share. A high concentration ratio ind icates that a high concentration of market share is held by the largest firms the industry is concentrated.3 lakh units in 7-08 • Targeted to be of $ 145 Billion by 2016 • in 2002-03 to 280. These fragmented markets are said to be competitiv e. Industry Rivalry • Industry Concentration: The Concentration Ratio (CR) indicat es the percent of market share held by a company.000 units Porter’s Five Forces Analysis of Indian Automobile Sector 1.Key Facts: • India ranks 12th in the list of the f more international players • Contributes 5% to rs in India has increased from 9. With only a few firms holding a large market share . .
The entrance is however also affected by the start-up costs • Econ omies of scale: The Minimum Efficient Scale (MES) is the point at which unit cos ts are minimized. it takes a beat in even slight economic disturba nces as it involves a luxury good. (2) The passenger car industry was delicen sed in 1993. • Slow market growth: In growing market. To remain ahead in competition. auto-makers were tempted to offer value added services to the customers incurring more costs. high levels of production lead to a fight for market share a nd results in increased rivalry. Economies of scale are becoming increasingly impor tant as competition is driving the profit margins to lower levels. Higher the competition in the industry lower would be the profit margin. and a v ery mature industry with very little growth were the features of a highly compet itive industry. Threat of New Entrants These are the characteristics that inhibit the entrance of new rivals into the m arket and in turn protect the profits of the existing firms. 2.• High Fixed costs: When total costs are mostly fixed costs. No industrial licence is . one can expect the entrance of new firms into the market or not. • Diversity of rivals: Industry becomes unstable as the dive rsification increases. Also being a capital intensive industry economies of scale have important consequence • Governm ent policies: (1) Automobile Industry was delicensed in July 1991 with the annou ncement of the New Industrial Policy. The industry is typically capital intensive and thus involves high fixed costs. the firm must produce capacity to attain the lowest unit costs. Since the firm must sell this large q uantity of product. Aggressive pricing is needed to sustain growt h in such situations. Based on the presen t profit levels in the market. greater is the barrier. In this case the diversity of rivals is moderate as most offer products which are close to standard versions and the competitors are also mostly similar in strength • Highly competitive industry: The presence of many pl ayers of about the same size little differentiation between competitors. firms ca n improve their economies. The greater the difference between the MES and the entry unit cost. Though the market growth has been impressive in the l ast few years (about 8 to 15%).
However. Also the high a vailability and quality of services offered by Maruti gives the customer a bette r trade-off.31 crore peopl e. The competition is intense as several players have prod ucts in the categories given by Maruti.77% in 19 92-93 to 5% in 2006-07. . The import of technology/tech nological up gradation on the royalty payment of 5% without any duration limit a nd lump sum payment of USD 2 million is allowed under automatic route in this se ctor. Threat of Substitutes • The replacement market is characterized by the presence of several small-scale s uppliers who score over the organized players in terms of excise duty exemptions and lower overheads. the threat of substitutes is high. The contribution of the automotive industry to GDP has risen from 2. (7) The industry provides direct and indirect employment to 1.000 crore in 2002-03 which has gone up to Rs. Price performance comp arison favors heavily towards Maruti in most product categories.: In case of Maruti‘s products.required for setting up of any unit for manufacture of automobiles except in som e special cases. (5) The automotive industry comprising of the automobile and the auto comp onent sectors has made rapid strides since delicensing and opening up of the sec tor to FDI in 1991. 1. • A product‘s price elasticity is affected by the presence of substitutes as its demand is affected by the change in the substitute‘s prices • The cost of the automobiles along with their operating costs was driving customers to look for alternative transportation options • The new technologies available al so affect the demand of the product e. (3) The norms for Foreign Investment and import of technology h ave been Progressively liberalized over the years for manufacture of vehicles in cluding Passenger cars in order to make this sector globally competitive.000 crore (34 billion US D). With all the policies regarding the FDI a nd Tariff barriers as mentioned above.65.g. The industry is making a contribution of 17% to the kitt y of indirect taxes of the Government. in the 800cc range it is the ma rket leader and the threat of substitute products is low.000 crore by the year 2007. 3. it has become easier for the foreign play ers to enter the Indian automobile industry. 50. (4) At present 100% Foreign Direct Investment (FDI) is permissible under automatic rou te in this sector including passenger car segment. (6) The industry had an investment of about Rs. 80. The automoti ve industry has already attained a turnover of Rs.
The customers are more or less concen trated in metros or other tier two cities. The industry is also concentrated in these regions mostly. • There is prevalence of alternative options. This is done in order to capture profits from the market. Here there are purchases of large volumes. the buyer is the one who sets the price in the market.4.: In the case of Maruti. Bu yers get incentives in the form of cost discounts and better after sales service s. Except the 800cc range in other categories brand loyalty is only moderat e.g. . Bargaining Power of Suppliers • Suppliers can influence the industry by deciding on the price at which the raw m aterials can be sold. the sales volumes have shown increasing trend over past so many years. 5. Bargaining Power of Buyers • It specifies the impact of customers on the product • When buyer power is strong. Product different iation is high as there are many categories in the passenger vehicle segment. other than steel as raw material which is highly p rice sensitive and the firm may easily move towards a supplier with lower cost. • Steel is a major input in this industry and so steel prices have a sharp and imm ediate impact on the product price • The industry being capital intensive switchin g costs of suppliers is high. Also it is difficult to measure since repurchases are rare. Most of them are have good amount of knowledge about the p roduct. • Price sensitive cu stomers were some of the factors that determine the extent of Influence of the b uyers in this industry e.
which cons titutes 61 per cent of its total revenues. The regions are North America. su ms up the Tata group‘s efforts to internationalize its operations thus: I hope that a hundred years from now we will spread our wings far beyond India. Among the bi gger deals on this front have been Tetley. Chairman. Vietnam. and Tyco Global Network and General Chemical in the US. joint v entures (in South Africa. .3 billion. In the past f ew years. At home in the world Anchored in India and committe d to its traditional values of leadership with trust. the Tata group is spreadin g its footprint globally through excellence and innovation. members of the Gulf Cooperation Counc il. Bangladesh and Iran). Brazil. Tata Sons. Jaguar and Land Rover in the UK. South Africa.TATA GROUP TATA Group is more than 150 years old. an Indian business conglomerate that is at home in the world. Ratan Tata. automobiles. that we bec ome a global group. Whi le individual Tata companies have differing geographical imperatives. the TATA group has led the growing appetite among Indian companies to acquire businesses overseas in Europe. Thailand and Sri Lanka. NatSteel in Singapor e. UK. Corus. Tata Group is the largest private corporate group in India and has been r ecognized as one of the most respected groups in the world. operating in many countries. the Tata g roup is focusing on a clutch of priority countries.in a bid to consolidate operations and emerge as the new age multinationals. Priority markets. The TATA group is 11th most reputable company in th e world according to Forbes. power. Over the past e ight years the group has made overseas acquisitions of $18 billion. the United States. The Tata group‘s reven ues for 2007-08 from its international operations were $38. communication. depending on the competitive dynamics of the industry in which it operates. It has interests in steel. Germany. tea and hospit ality. but different Tata companies are increasingly investing in assets overseas thr ough Greenfield projects (such as in South Africa. Daewoo Commercial Vehicles in South Korea. carrying the same sense of trust that we do today . Chin a. which are expected to be of strategic importance in the years ahead. The Tata Group has operations in more than 85 countries across six contin ents and its companies export products and services to 80 nations. the Netherlands. Each operating company in the group d evelops its international business as an integral element in an overall strategy . In terms of market capitalization and rev enues. Brunner Mond. Australia and Africa s ome even several times larger . Acquisitions are a crucial component of the global expansion of Tata enterprises. Morocco and China) and acquisitions. Ex ports from India remain the cornerstone of the Tata group‘s international business . information technology.
• TATA Motors. Foreign vehicle makers including Daimler. engines and transmissions in India. is also facing heat from top car maker Maruti Suzuki India Ltd. Hyundai Motor. Renault and Volkswagen. Nissan Motor.TATA MOTORS TATA Motors is the flagship company of the TATA group & is India s largest autom obile player. Volvo and MAN AG have struck lo cal alliances for a bigger presence.2 billion in 2006-07. Previously TATA Engineering and Locomotive Comp any (Telco). which in December 2006 expressed the view that the policy to support its companies and the improved financial profile of its entities also enhances the overall financial flexibility of TATA Motors. With over 4 million TATA vehicles plying in India. Environmental Regulations . with revenues of $7. Compe tition at Home • TATA Motors is vulnerable to greater competition at home. TATA Motors is listed on the New York Stock Exchange in 2004. Makin g Waves Internationally • NANO will mark the advent of India as a global centre fo r small-car production • International praise came from Standard & Poor‘s. it is the leader in commercial vehicles and the secon d largest in passenger vehicles. which has a joint venture with Fiat for cars.
The company incurred la rge expenditure for its R&D activities. environmental technologies and vehicle safety through its Engin eering Research Centre (ERC).6 mi llion (approximately $9.2% in FY2008. The company is also the leader in the Indian commercial vehicles with a market share of 62.072. The ERC is one of the few government recognized in house automotive R&D centers in India. an affordable family car.1% in FY2008. The company‘s R&D activities focus on prod uct development. Steady revenue g rowth: The company recorded strong revenue growth during 2004-08.1% to reach INR365. In the recent period. The company‘s market share in the Indian four-wheeler automotive vehicle market (i.696 million (approx imately $3. automobile vehicles other than two and three wheeler categories) st ood at 26. The strong R&D capability enables the c ompany to build a broad range of vehicle portfolio and improves its competitive strength in the automotive industry.SWOT Strengths: Strong domestic player: Tata Motors is India‘s largest automobile manufacturer by revenue. The strong revenue growth of the company has co ntributed to its market dominance.230.7% and is the second largest player in the In dian passenger vehicles market with a share of 14. the revenues of the company grew at a CAGR of 27.3 million) in FY2008 from INR139. Research and development activities: Tata Mot or has strong research and development (R&D) capability. During this ti me.096 million) in 2004. the ERC developed the Tata Nano. .e.
Furthermore. In FY2008. In March 2008.324 units.53 million). Honda Motor.64 9 vehicles. For instance in December 2007. Opportunities: Product launches: Tata Motors has launched various new products during the last two year period (2007–08). Ford and so on.200 dealer s. NANO‘ in January 2008 would further fuel its presence i n the passenger vehicle market. Acquisition of JLR provides the company with a strategic opportunity to acqui re iconic brands. Tata Motors introduced i ts new range of Medium and Heavy Commercial Vehicles.73 million). The revenue per employee of the group stood at INR10 million ( approximately $0. and erode investors‘ confidence. Fiat.309.8% in 2007. The overall market share of the company stood at 25.4% to reach the total vehicle sales to 2. Mitsubishi Motors. the company launched the Indigo sedan and Indi ca with the Direct Injection Common Rail (DICOR) and Sumo Grande. The weak revenue per employee of the company compared to the global auto majors indicates its weaker productivity and operational inefficiency. t he launch of its small car. The company recorded a sale of 585. The decline in sales would fu rther affect the company‘s market share. Maruti Udyo g. Employee p roductivity: Tata Motors posted weak revenues in proportion to the total number of its employees. Threats: Increasing competition: Tata Motors face intense competition from its domestic a s well as foreign competitors including General Motors. the automotiv e industry in India recorded a growth of 10. Tata Motors (Thailand) launched the Tata Xenon 1-ton pickup truck at the annual Bangkok Int ernational Motor Show. Acquisition of Jaguar and Land Rover brands: The se brands had sales operations in more than 100 countries with over 2. a growth of 0.4% in 20 08 as compared to a market share of 27. Competition is expected to intensify further as Indian automotive manufacturers obtain greater access to debt and eq uity financing in the international capital markets or gain access to more . and Nissan Motor ($.9% over last year.24 million).Weaknesses: Decline in vehicle sales: Tata Motors recorded decline or marginal growth in its vehicle sales in the last financial year. and increase the company‘s business diversity across markets and product segments. During the same time. significantly lower when compared to its global co mpetitors such as Toyota Motor ($.
TATA Motors acquired the Daewoo Comm ercial Vehicle Company of South Korea. Environme ntal regulations: The company is subjected to extensive governmental regulations regarding vehicle emission levels. safety and levels of pollutants gener ated by its production facilities.advanced technology through alliances. the govern ment of India has permitted automatic approvals for foreign equity ownership of up to 100% in entities manufacturing vehicles and components in India. noise. The proposed tightening of vehicle emissions regulations will requ ire significant costs for the company. TATA Daewoo Commercial Vehicle. Additionally. in recent years. TATA remains India's largest heavy commer cial vehicle manufacturer and TATA Daewoo is the 2nd largest heavy commercial ve hicle . Jaguar Land Rover has significant oper ations in the US and Europe which have stringent regulations relating to vehicul ar emissions. In addition. These regulations are likely to become more s tringent in the near future.In 2004. Major international ventures of TATA Motors in recent past are discussed below: 1.
The reasons behind the acquisition were: a) Company's global plans to reduce domestic exposure. Hispano Carrocera is an established and reputed bus and coach manufacturer i n Spain enjoying excellent reputation for developing high quality vehicles. Zaragoza in Spain and Casablanca in Morocco. sensing the huge opportunity in the fully built bus segment. North Africa. TATA Motors has a high domestic exposure of ~94% in the MHCV segme nt and ~84% in the light commercial vehicle (LCV) segment. TATA plans to lever age on the strong presence of TDCV in the heavy-tonnage range and introduce prod ucts in India at an appropriate time. This was mainly to cater to the internatio nal market and also to cater to the domestic market where a major improvement in the Road infrastructure was done through the National Highway Development Proje ct. Since the domestic co mmercial vehicle sales of the company are at the mercy of the structural econo m ic factors. TATA Motors has jointly worked with TATA Daewoo to develop trucks such as No vus and World Truck 2.manufacturer in South Korea. The company plans to diversify into various markets across the world in both MHCV as well a s LCV segments.In 2005. TATA Motors acquired 21% stake in Hispano Carroc era SA. . Aragonese bus manufacturing company with an option to acquire 100% holdi ng. Hispano Carrocera. It o perates in two manufacturing locations namely. The domestic commercial v ehicle market is highly cyclical in nature and prone to fluctuations in the dome stic economy. b) To expand the product portfolio TATA Motors introduced the 25 MT GVW TATA Novus from Daewoo‘s (South Korea) (TDCV) platform. it is increasingly looking at the international markets.
This partnership gives both companies an opportunity to use their complementary strengths to create high-class transport solutions f or intra-city and intercity mass transportation in Spain. U. Hispano enjoys a market share of 25 per cent in the bus market in Spain and sells considerable numbers in Eur ope in addition to other countries outside Europe as well. TMML JV‘s first assignment in India was to supply 500 premium class low floor buses for Delhi Transport Corporation. . Future Plans: TMM L has plans to set up the world‘s biggest bus plant at Dharwad. This strategic alliance with Hispano Carrocera gave TATA Motors access to its design and technological capab ilities to fully tap the growing potential of this segment in India and other ex port markets. Mumbai and Banga lore Transport Corporations. TATA Marco polo (TMML) . the Hispano deal will help the Indian commercial vehicle giant grow in the bus and coach seg ment as the Daewoo acquisition helped it in trucks. It is aiming to ca ter to the fully built bus requirements of Indian mass as well as luxury markets . TATA and Marcopolo ha ve launched a low-floor city bus which is widely used by Delhi. The company plans to make 20. With this dea l Tata Motors acquired the license for technology and brand rights from Hispano.P. low cost market a vendor park has been established in Dharwad itself. Further. Besides Tata Motors is also seeing this deal as a gat eway into the highly competitive and matured European markets considering the su ccess Hispano's bus range enjoys in these markets. This joint venture is to manufacture and assemble fully built buses and coaches targeted at developing mass rapid tra nsportation systems. besides providing it with a foothold in developed European markets .TATA Motors has formed a 51:49 joint venture in bu s body building with Marco polo of Brazil. Karnataka & Lucknow. The total deal consisting of equity.Hispano has proven competence in development of buses and coaches. The joint venture will absorb technology and expertise in c hassis and aggregates from TATA Motors.000 buses a year at its full cap acity. Joint venture ha s started its operations at Dharwad. debt and technology licensing amounted to about Rs 70 crore to Tatas. To compete in high volume. India and many other c ountries around the world. and Marcopolo will provide know-how in p rocesses and systems for bodybuilding and bus body design. 3.
The car is assembled in Thailand by Tata-Thonburi JV and in Argentina by Tata-Fiat JV. Tata Motors signed a joint venture with Thonburi Automotive Assembly Plant Co. While a new product development timeline takes between 36 to 50 months. TATA Xenon. (Thonburi). It was first displayed at t he 2006 Bologna Motor Show. S Africa. Bologna Motor Show 2006 (Dec) was the occasion when Xenon was unveiled for public display and later in March 2007. The te am delivered project in 17 months—from styling freeze in Dec 05 to SOP ( Start of Production) in May 7. assemble and market pickup trucks in D ec‘06. applied principl es of "Concurrent Engineering". it was also displayed a t Geneva Motor Show 2007. in which Tata Motors holds 70% of the equity and Thonbur i 30%. SPRINT was the code name of the Project for develop ment of Tata's World Pick-up (truck).4. the second largest pickup market in the world after the US. The team worked round the clock relentlessly. Tata initiated an in-depth mark et study in various countries in Europe. Middle East. . Both partners jointly manage the operat ions. The joint venture facilitated Tata Motors address the Thailand market. Africa and SE Asia. Isuzu. the Thailandbased independent assembler of automobiles to manufacture. the n ame SPRINT which signifies and continuously reminded project team about the Spee d of the project. The Xenon has been well received in Europe es pecially in Spain and Italy. Latin America etc to understand needs of target segments for a new Pick-up. The joint venture. Hence. Nissan. there is a big opportunity for TML to grab s ubstantial market share of world Pick-up market. Till date Xenon has been launched in 14 countries in E urope. Mitsubishi. As per the study conducted by Tata Motors. Middle East. gets vehicles manufactured in Thonburi‘s manufacturing facility.TATA Xenon was released in late 2007. Austra lia. distributed work load in 9 different countries i n order to crash timeline by overlapping maximum possible key activities. World Pick-up market (other than USA) is d ominated by Japanese Auto majors like Toyota. it is s aid that so far only Toyota has achieved the Timeline of 18 months. Thailand.
Pune with capacities to pr oduce in excess of 200. and Fiat will eventually source righ t-hand drive Linea cars from here for the UK and Australia. JV is a lready producing the Fiat Palio.5.000 engines and transmissions yearly.The TATAs and Italian car giant Fiat kicked off their partnership with the former marketing Fiat cars since Mar‘06. The partnership took off to the next level in Dec‘06 with both the sides announcing the formation of a joint ventu re with aggregate investments of over Rs 4000 crore (over euro 665 million) in a phased manner to manufacture vehicles for the Indian and overseas markets. Fiat has a cost adva ntage of 14-17% over Brazil and Turkey due to localisation of parts and labour c osts. The 50:50 joint venture enabled Fiat plant at Ranjangaon. . Such was the level of confidence among both the partners that investm ents began at least two years before even a formal agreement was signed. at steady state. Fiat had almost decided to quit the Indian market but for Fiat chief execu tive officer Sergio Marchionne and Tata group chairman Ratan Tata coming togethe r in 2005. Fiat branded cars are distribute d by Tata through the Tata-Fiat dealer network. It com pares well as the lowest-cost manufacturer. Stile and Linea models and select Tata Indica m odels. Fiat‘s Ranjangaon manufacturing facility is be nchmarked against the global car manufacturer‘s units in Turkey and Brazil. The JV may be expanded to produce trucks as well. It enables Tata Motors to access worldc lass powertrains from Fiat for its next generation car offerings while enhancing the model line at its dealerships. TATA Fiat. This strategic alliance with Fiat enables the two companies jointly to present a wider range of product offerings to the Indian market.000 cars and 300.
Although MG Rover was bought by Nanjing Automobile of China i n July 2005. production of the Ci ty Rover ended in April 2005 when the company went into receivership. . Along with the rest of the MG Rover range. This was one of the un successful attempts of Tata Motors to go global. the buying public was not impressed by the £7. The second model will be Tata Motors‘ new three-box offering.200910. the car was a rebadge d version of the Tata Indica.Future Plans: The company is readying to launch the Grande Punto. a compact car. City Rover. Planned launch of the Fiat Bravo is being delayed because of the economic slowdo wn. and its asking price was high compared with newer. the last v ehicles brought into the UK being purchased and sold on by a non-franchised disc ount dealer group.000 for each car and. better built and bet ter specified rivals such as the Fiat Panda. MG Rover group used to import TATA Indica from Ind ia and sold as City Rover in UK market.The City Rover was a hatchback car model offered by MG Rov er Group in the UK market. despite each model featuring a Rover corporate nose and revised suspension settings. the company's new owners did not include the City Rover or indeed a ny direct successor in their plans for a new model range. Fiat manufactures Tata Motors‘ 1-tonne pick-up truck at its plant in Argentina for Latin American and overseas markets. MG Rover was reported to be paying Tata £3. The City Rover's running costs were rath er high. Launched in the Autumn of 2003. 6.000 starting price. The JV is expected to break even by 20 11-12. in the third quarter of the fiscal year. code-named X1.
The company expects internatio nal volumes to be at par with numbers in India. South Africa. It competes with the likes of Mercedes. the SAARC countri es and the Middle-East by the end of the fiscal. . Sri Lanka. speed and carrying capacity. The new range from Tata Motors will meet those needs. Volvo. It will also help it penetrate international markets more effectively and competitively. Future Plans: The commercial launch of these trucks in India is scheduled during JulySeptember‘09. The developing infrastr ucture in India makes it possible for transporters to reap the benefit of trucks with higher power. Exports Market (CV). developed jointly with TATA Daewoo Commercial Vehicles of South Korea in May‘09. Bangladesh.7. and H yundai etc in Middle East markets.TATA Motors unveiled its World Truck‘ range. Afghanistan apart from South Afri ca and Middle East markets. The trucks will be made at the Jamshedpur facility and at Gunsan in South Korea. World Truck.TATAs export its commercial vehicles to neighboring Asia n countries like Nepal. 8. They will debut in South Korea.
16 lakh). An intelligent car at $3000 would be a good A Promise is a Promise bargain after all.15 billion pounds in M ar. India has been established as an R&D leader. Chairman of the Tata Group and Tata Motors. it can have a market in the US. In Nigeria. The Tata Nano will certainly f ind big takers in India. According to TATA Motors off icials. but timeli nes. wh o has described it as an eco-friendly "people's car". many in the US will look forward to own it. because innovation is all about thin king of the next decade and not the next quarter. the Tata Na no Europa (the European version of the Nano) was unveiled at the Geneva Auto Sho w. ma king it cheaper than even used cars in the country. as well as expand the Indian car market by 65%. the Nan o will cost 357. The company is planning to market Nano in other countries.480 NGN (Rs 1. thanks to Tata's Nano. The car is expected to boost the Indian economy. However. The car has cost over Rs 2. It has shown to the world that India can be a t echnology leader. TATA Nano.Conceived in 2003. Tata Motors had launched the much. and not just a low -cost hub known for cheap labor. modes and countries are yet to be finalized.000 crore to the company. almost the same as its cost in India. Future Plans: Tata Motors will be launching it in Nigeria within the next year and a half.Apr‘08. The Nano Europa will be launched in 2011. as well. for many Americans. If th e car is enriched with high technology functions to make it an intelligent car. Earlier this year. It is a great innovation. Tata gained the . TATA-JLR: TATA Motors bought th e iconic Jaguar and Land Rover operations from Ford for 1. For the first time. Nano will greatly benefit Nigerians as there is no proper public transpo rt system in the country. Tata's Nan o shows that there is a huge opportunity for Indian companies to build profitabl e low-cost products and then take them to the US. 10. Company is yet to decide whether the car would be asse mbled in Nigeria itself or if it would be made available as a Completely Built U nit (CBU).hyped 'cheap est' car in India in Mar‘09.9. The car was envisioned by Ratan Tata. create entrepreneurial opportunities across India.
In the long-run TATA Group and TATA Motors‘ footprint in South-East Asia should help Jaguar/Land Rover diversify their geographic depe ndence from US (30% of volumes) and Western Europe (55% of volume). The global meltdown dragged JLR int o huge losses as consumers‘ halted purchases.5 billion takeov er by Tata Motors last June. Tata Motors kille d several birds with one stroke. The key acquisition would be of the intellectual property rights related to the tech nologies. after the $2. In addition to the bra nds. Lanchester. Tata Motors also gained access to 2 design centers and 3 plants in UK. dropped a third to 1. It provides an entry point into India‘s growing luxury car market which gives new impetus to the compan y‘s development program as well and provides a captive customer base for the compo nent companies of the Tata‘s.000 car: no other company in the world has a portfolio th at wide. .500 car and a $100. The India foray comes at a time when worldwide sales of luxury cars are falling. The acquisition paves the way for the company‘s e ntry into the European car market and gives the company a comprehensive range of models ranging from the luxury Jaguar to the $2. Analysts bel ieve that TATAs‘ ownership of JLR will open doors for outsourcing of parts from In dia. Why JLR? • Long term strategic commitment to automotive sector • Opportunit y to participate in two fast growing auto segments • Increased business diversity across markets and products • Land rover provides a natural fit for TML‘s SUV segmen t • Jaguar offers a range of performance/luxury vehicles to broaden the brand portfo lio • Benefits from component sourcing. The bridge f rom the Nano to Jaguar XF is probably the biggest that exists in the industry. it launched the British iconic luxury brands in the Indian market. Present and Future Plans: A year after Tata group purchased Jaguar and Land Rover. design services and low cost engineering.67 lakh vehicles. A $2. particularly from the current pool of suppliers who service TATA Motors in India.rights to the Daimler. and Rover brand names. With the acquisition of Jaguar and Land Rover (JLR).500 Nano. Sales.
the sales and revenues of JLR were far s hort of expectations.200 crore billion a year ago.2 % ahead of 2007 for the year. Unfortunately for Tatas. In the first two months of 2009.9 % ahead of 2008 and Land Rover 45 % down when . The consolidated net loss was Rs 2. as Tatas discovered this May. In FY 2008-09. the worst fear of the skeptics has come to pass. 2009 compared with a net income of Rs 2. This had two implications. while Land Rover had felt the impact of the downturn and its full-year sales were 17. post acquisition. At the time of acquisition of JLR by TATA Motors.Impact of Current Global Slowdown on TATA-JLR Deal: We went too far with JLR : Rata n Tata Tata Sons Chairman Ratan Tata recently said he may have overstretched him self in paying 1. Jaguar wa s 8. Second.6 % less than in 2007. loans that mature and cannot be repaid have to be refinanced and rolled over to prevent default.6 % ahead of 2007. there were some who called for caution. In the first half of 2008. Jaguar and Land Rove r plunged amid the global recession. Within months of the acquisition. Given the current circumstances. At the end of 2008.2 % more than in the same period in 2007 while Land Rover‘s was 0. the world witnessed the onset of a financial crisis that triggered a credit crunch and precipitated a real econo my recession. this is di fficult. First. Jaguar‘s sales volume was 11. Jaguar was 6. when the $3 bn it had borrowed to finance acquisition of JLR was due for refinancing. A year after the Tata group took over the two of Britain‘s most iconic automo bile brands. debt at the lev el of both parent and the United Kingdom subsidiaries in the TATA group was slat ed to rise sharply.3 billion to Ford for the acquisiti ons on March 26.500 cror e in the year ended 31 March. Tata Motors Ltd posted its first annual lo ss in at least eight years after sales at the luxury units. Jaguar and Land Rover.15 billion pounds for Jaguar Land Rover just as a recession loo med. making it difficult for Tatas to meet commitment on their debt and reduce the degree of leverage. it is faced with newer and bigger challenges than it would have expected when it paid $2. Industries such as steel and automobiles were among the worst affe cted. Moreover. After the Tatas acquired the compan y. with much of this debt being of a bridge loan kind. 2008. They pointed out that buying in to an automobile major when the market for automobiles was set for a downturn mi ght not reflect good business sense. business challenges were mostly a result of adverse market conditions. Ratan Tata is slashing investments by as much as 38% in the year to March on slow economic growth.
Even wh en the group embarked on its ambitious overseas acquisition strategy.compared with the same period last year. There have been a series of nonproducti on days at all three of its UK assembly plants — Castle Bromwich and Solihull in t he West Midlands and Halewood on Merseyside. the UK government approved a grant of £27 million (Rs 192 crore) to JLR for producing a new ecofriendly car based on Land Rover‘s LRX Conce pt.100 crore) for research to reduce the CO2 emissions from JLR‘s future products. which too was seeking to build India itself as a global brand.000odd workers agreed to a two-year pay freeze on condition of no compulsory layoffs. Tata may have part with some e quity interest in JLR. laun ching a fixed deposit scheme and by selling the shares of Tata Steel it held. According to a recen t report in The Economic Times. Although JLR has t he option of getting guarantees from private banks. If the UK government‘s help does not come soon. Each plant lost an average of 25 da ys‘ production. besides giving board representation. This is expected to save the company up to £68 million a year. The Tatas are trying to persuade the British govern ment to stand guarantee for loans that they plan to seek from the UK banks to ba il out JLR. the UK government s support is crucial as JLR wants it to guarantee a pound 3 40 million European Investment Bank loan sanctioned in April. the company‘s 14. Luxembourg-based European Investment Bank is also considering giving a loan of £275 million (Rs 2. While Tata looks to sustain JLR through the downtur n.11 bn of its original bridge loan by mobilizing funds through a rights issue. which equated to a volume reduction of approximately 25 per cent m onth on month. Tata‘s bankers are s eeking to secure short-term finance of between £500 million and £1 billion to allow Jaguar Land Rover to pay off supplier payments due by the end of the summer and stop it running out of cash. What is remarkable is that the Tata group has been able to rid e the waves and come ashore safely this time as well. Tata Motors will ha ve to cut down its investment plans for Jaguar Land Rover (JLR) with possible jo b losses and plant closures. Despite the c hallenges.000 cars worth £600 million over the next thr ee years. More recently. To get the government s help. Tatas mobilized Rs 42 bn through bond markets with the help of . The company also bagged a significa nt order from China for supplying 13. there have been some good news. A worsening economic situation could lead to further job losses a nd even plant closures at Jaguar Land Rover (JLR) in Britain. Se cond. it may work out to be an exp ensive proposition. the company is negotiating at the moment and if there was a large financial package from the UK government to the company then t here would be a commensurate level of representation on the board. the Tata group has mobilized the support of the Indian government. Tata Motors returned $1. there was evidence that it had the backing of the Indian government. The British government has been reluctant to provide these loan guar antees so far.
the Indian government and the Indian public. This money was in essence a loan from public at large & Tatas will pay interest rate on the same. debt-financed acquisition JLR. In sum. the Tata group has escaped a group-wide crisis b y leveraging its brand. Tatas are also in talks with defense estab lishment to obtain secure orders for the Land Rover. Tat as launched Nano in Apr‘09 and received 203.government-owned State Bank of India. the Tatas have use d innovation to obtain support from the Indian public for its UK operations. despite its grievous errors in the form of the crisiseve. Finally. This money is also crucial to the Tatas‘ surv ival strategy. even if fortuitous to some degree. That is ind eed remarkable. .000 advance orders & raised Rs 25 bn f rom Indian public.
there is a real possibility that the brand will cease to exist. TML needs to have a similar differentiated strategies focusing separately o n these brands. the Jaguar Lan d Rover deal shows us that TML is now targeting brand conscious. The two ways firms compete are by either a differentiation strategy or a low cost strat egy. Saab. Quality TML can greatly enhance customers‘ perceptions of these three criteria with targeted increased investments. . The Tata Indica and Tata Nan o are prime examples of the company‘s innovation capabilities and bear testimony t o the strength of the company‘s R&D efforts. TML is in a unique position to inves t given the company s strong balance sheet and overall financial health. TML has come to be known as an innovator in the passenger car segment not just in manufactur ing but along multiple areas along the value chain.Recommendations Industry analysts expect GM to sell the Hummer brand in 2009 and without a selle r in sight. high-end consum ers.or better products. This innovation fuelled growth couple d with strategic acquisitions is expected to catapult the company to a preeminen t position internationally. A pu sh in developing cutting-edge products in the Land Rover brand could enable Tata to capture Hummer customers as they look for comparable . As c ompetitors such as Volvo. best in the products we deliver and best in our value systems and ethics . TML‘s vision is to be best in the manner in which we operate. Brand appeal. C ompany needs to focus on these 3 aspects to attract the consumers of the highend market products: 1. However. Performance Characteristics 3. Hummer and others fail to maintain investments i n either development or marketing. performance and quality are all functions of the investments made in product development and marketing. as we ve seen the route TML has taken involves competing on both s trategies. this leaves the door open for TML to capitali ze and gain both market share and momentum. While the Nano targets the price conscious common man. Brand Appeal and Endorsement 2.
tatamotors.com • Kel ly School of Business Report on Tata Motors Limited Comprehensive Strategic Anal ysis • IHS Global Insight Report: India (Automotive) .wikipedia.com • www.ndtv.wikipedia.wikipedia.com • www.com • http://en.rediff.org/wiki/Indian_automobile_ industry • http://en.References: • www.tata.org/wiki/Tata_Xenon • www.July‘09 • The Economic Times .wikipedia.org/wiki/Tata_group • http://en.org/wiki/Tata_motors • http:// en.