37872217 Tata Motors Final Projectabhi

8/8/2019 37872217 Tata Motors Final Projectabhi

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Executive SummaryThe report talks about the Indian automobile industry in general and Indian automobile giant. TATA Motors in particular. We have analyzed Indian automobile industry using Porters 5forces model & its performance in the recent past. Particularly we have tried to track the path of TATA Motors expansion of international business in the recent past, at present as well as its future plans. We have also discussed the impact of current financial meltdown on the recent international ven

tures of the company. The company is rapidly increasing its global footprint andis aiming to match the standards of international automobile manufacturers in next 3 to 5 years. This rise to the level of a world-class automotive manufacturer would involve a large quantifiable increase in revenues from outside India with a focus on certain foreign markets. Currently international business contributes 18.4% to companys revenues. Company is aiming to increase it by 200% in near future to reduce its dependence on one single economy and one single business cycle. This ambition of the company has led to numerous joint ventures and increased activity in countries like the U.K., South Africa, South Korea, Thailand, Brazil and Spain, as well as the company is listing on the NYSE. With the recent acquisition of Jaguar Land Rover (JLR) from the Ford Motor company in early 2008, the 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 exclusivity conflict with the proposition of TMLs other recent venture, the inexpensiveNano. In this manner, the decision to compete in both the high-end luxury and low-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 proven compatible, could mitigate each others risks.


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Indian Automobile IndustryHailed as the industry of industries by Peter Drucker, the founding father of thestudy of management, in 1946, the automobile industry had evolved continuously with changing times from craft production in 1890s to mass production in 1910s tolean production techniques in the 1970s. The automotive industry in India grewat 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 July09 said. The indust

ry has a strong multiplier effect on the economy due to its deep forward and backward linkages with several key segments of the economy, a finance ministry statement said. The automobile industry, which was plagued by the economic downturnamidst a credit crisis, managed a growth of 0.7 percent in 2008-09 with passenger car sales registering 1.31 percent growth while the commercial vehicles segment slumped 21.7 percent. Indian automobile industry has come a long way to from the era of the Ambassador car to Maruti 800 to latest M&M Xylo. The industry is highly competitive with a number of global and Indian companies present today. Itis projected to be the third largest auto industry by 2030 and just behind to US & China, according to a report. The industry is estimated to be a US$ 34 billion 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 Auto, Honda Motors, TVS Motors, and Suzuki etc. Maruti Udyog and Tata Motors arethe leading passenger car manufacturers in the country and India is considered as strategic market by Suzuki, Yamaha, etc. Commercial Vehicle market is cateredby players like Tata Motors, Ashok Leyland, Volvo, Force Motors, Eicher Motors etc. The major players have not left any stone unturned to be global. Major of the players have got into the merger activities with their foreign counterparts. Like Maruti with Suzuki, Hero with Honda, Tata with Fiat, Mahindra with Renault,Force Motors with Mann.


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Key Facts: India ranks 12th in the list of the world's top 15 automakers Entry of more international players Contributes 5% to the GDP Production of four wheelers in India has increased from 9.3 lakh units in 2002-03 to 23 lakh units in 2007-08 Targeted to be of $ 145 Billion by 2016 Exports increased from 84,000 unitsin 2002-03 to 280,000 units in 2007-08

Porters Five Forces Analysis of Indian Automobile Sector

1. Industry Rivalry Industry Concentration: The Concentration Ratio (CR) indicates the percent of market share held by a company. A high concentration ratio indicates that a high concentration of market share is held by the largest firms -the industry is concentrated. With only a few firms holding a large market share, the market is less competitive (closer to a monopoly). A low concentration ratio indicates that the industry is characterized by many rivals, none of which has a significant market share. These fragmented markets are said to be competitive. If rivalry among firms in an industry is low, the industry is considered to be disciplined.


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High Fixed costs: When total costs are mostly fixed costs, the firm must producecapacity to attain the lowest unit costs. Since the firm must sell this large quantity of product, high levels of production lead to a fight for market share and results in increased rivalry. The industry is typically capital intensive andthus involves high fixed costs. Slow market growth: In growing market, firms can improve their economies. Though the market growth has been impressive in the last few years (about 8 to 15%), it takes a beat in even slight economic disturba

nces as it involves a luxury good. Aggressive pricing is needed to sustain growth in such situations. Diversity of rivals: Industry becomes unstable as the diversification increases. In this case the diversity of rivals is moderate as mostoffer products which are close to standard versions and the competitors are alsomostly similar in strength Highly competitive industry: The presence of many players of about the same size little differentiation between competitors, and a very mature industry with very little growth were the features of a highly competitive industry. Higher the competition in the industry lower would be the profitmargin. To remain ahead in competition, auto-makers were tempted to offer valueadded services to the customers incurring more costs.

2. Threat of New Entrants

These are the characteristics that inhibit the entrance of new rivals into the market and in turn protect the profits of the existing firms. Based on the present profit levels in the market, one can expect the entrance of new firms into themarket or not. The entrance is however also affected by the start-up costs Economies of scale: The Minimum Efficient Scale (MES) is the point at which unit costs are minimized. The greater the difference between the MES and the entry unitcost, greater is the barrier. Economies of scale are becoming increasingly important as competition is driving the profit margins to lower levels. Also being acapital intensive industry economies of scale have important consequence Government policies: (1) Automobile Industry was delicensed in July 1991 with the announcement of the New Industrial Policy. (2) The passenger car industry was delicensed in 1993. No industrial licence is


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required for setting up of any unit for manufacture of automobiles except in some special cases. (3) The norms for Foreign Investment and import of technology have been Progressively liberalized over the years for manufacture of vehicles including Passenger cars in order to make this sector globally competitive. (4) Atpresent 100% Foreign Direct Investment (FDI) is permissible under automatic route in this sector including passenger car segment. The import of technology/technological 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 sector. (5) The automotive industry comprising of the automobile and the auto component sectors has made rapid strides since delicensing and opening up of the sector to FDI in 1991. (6) The industry had an investment of about Rs. 50,000 crorein 2002-03 which has gone up to Rs. 80,000 crore by the year 2007. The automotive industry has already attained a turnover of Rs. 1,65,000 crore (34 billion USD). (7) The industry provides direct and indirect employment to 1.31 crore people. The contribution of the automotive industry to GDP has risen from 2.77% in 1992-93 to 5% in 2006-07. The industry is making a contribution of 17% to the kitty of indirect taxes of the Government. With all the policies regarding the FDI and Tariff barriers as mentioned above, it has become easier for the foreign players to enter the Indian automobile industry.

3. Threat of Substitutes The replacement market is characterized by the presence of several small-scale suppliers who score over the organized players in terms of excise duty exemptionsand lower overheads. A products price elasticity is affected by the presence ofsubstitutes as its demand is affected by the change in the substitutes prices Thecost of the automobiles along with their operating costs was driving customersto look for alternative transportation options The new technologies available also affect the demand of the product e.g.: In case of Marutis products, the threatof substitutes is high. The competition is intense as several players have products in the categories given by Maruti. However, in the 800cc range it is the market leader and the threat of substitute products is low. Price performance comparison favors heavily towards Maruti in most product categories. Also the high a

vailability and quality of services offered by Maruti gives the customer a better trade-off.


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4. Bargaining Power of Suppliers Suppliers can influence the industry by deciding on the price at which the raw materials can be sold. This is done in order to capture profits from the market. Steel is a major input in this industry and so steel prices have a sharp and immediate impact on the product price The industry being capital intensive switching costs of suppliers is high, other than steel as raw material which is highly price sensitive and the firm may easily move towards a supplier with lower cost.

5. Bargaining Power of Buyers It specifies the impact of customers on the product When buyer power is strong,the buyer is the one who sets the price in the market. Here there are purchasesof large volumes. There is prevalence of alternative options. Price sensitive customers were some of the factors that determine the extent of Influence of the buyers in this industry e.g.: In the case of Maruti, the sales volumes have shownincreasing trend over past so many years. The customers are more or less concentrated in metros or other tier two cities. The industry is also concentrated inthese regions mostly. Most of them are have good amount of knowledge about the product. Except the 800cc range in other categories brand loyalty is only moderate. Also it is difficult to measure since repurchases are rare. Product different

iation is high as there are many categories in the passenger vehicle segment. Buyers get incentives in the form of cost discounts and better after sales services.


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TATA GROUPTATA Group is more than 150 years old. In terms of market capitalization and revenues, Tata Group is the largest private corporate group in India and has been recognized as one of the most respected groups in the world. It has interests insteel, automobiles, information technology, communication, power, tea and hospitality. The Tata Group has operations in more than 85 countries across six continents and its companies export products and services to 80 nations. In the past f

ew years, the TATA group has led the growing appetite among Indian companies toacquire businesses overseas in Europe, the United States, Australia and Africa some even several times larger - in a bid to consolidate operations and emerge asthe new age multinationals. The TATA group is 11th most reputable company in the world according to Forbes. At home in the world Anchored in India and committed to its traditional values of leadership with trust, the Tata group is spreading its footprint globally through excellence and innovation. The Tata groups revenues for 2007-08 from its international operations were $38.3 billion, which constitutes 61 per cent of its total revenues. Each operating company in the group develops its international business as an integral element in an overall strategy, depending on the competitive dynamics of the industry in which it operates. Exports from India remain the cornerstone of the Tata groups international business

, but different Tata companies are increasingly investing in assets overseas through Greenfield projects (such as in South Africa, Bangladesh and Iran), joint ventures (in South Africa, Morocco and China) and acquisitions. Acquisitions area crucial component of the global expansion of Tata enterprises. Over the past eight years the group has made overseas acquisitions of $18 billion. Among the bigger deals on this front have been Tetley, Brunner Mond, Corus, Jaguar and LandRover in the UK, Daewoo Commercial Vehicles in South Korea, NatSteel in Singapore, and Tyco Global Network and General Chemical in the US. Priority markets. While individual Tata companies have differing geographical imperatives, the Tata group is focusing on a clutch of priority countries, which are expected to be ofstrategic importance in the years ahead. The regions are North America, UK, China, the Netherlands, Germany, South Africa, members of the Gulf Cooperation Council, Brazil, Vietnam, Thailand and Sri Lanka. Ratan Tata, Chairman, Tata Sons, su

ms up the Tata groups efforts to internationalize its operations thus: I hope thata hundred years from now we will spread our wings far beyond India, that we become a global group, operating in many countries, an Indian business conglomeratethat is at home in the world, carrying the same sense of trust that we do today.


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TATA MOTORSTATA Motors is the flagship company of the TATA group & is India

s largest automobile player, with revenues of $7.2 billion in 2006-07. With over 4 million TATAvehicles plying in India, it is the leader in commercial vehicles and the second largest in passenger vehicles. Previously TATA Engineering and Locomotive Company (Telco), TATA Motors is listed on the New York Stock Exchange in 2004. Competition at Home TATA Motors is vulnerable to greater competition at home. Foreign

vehicle makers including Daimler, Nissan Motor, Volvo and MAN AG have struck local alliances for a bigger presence. TATA Motors, which has a joint venture withFiat for cars, engines and transmissions in India, is also facing heat from topcar maker Maruti Suzuki India Ltd, Hyundai Motor, Renault and Volkswagen. Making Waves Internationally NANO will mark the advent of India as a global centre for small-car production International praise came from Standard & Poors, which inDecember 2006 expressed the view that the policy to support its companies and theimproved financial profile of its entities also enhances the overall financialflexibility of TATA Motors. Environmental Regulations


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SWOT Strengths:Strong domestic player: Tata Motors is Indias largest automobile manufacturer byrevenue. The companys market share in the Indian four-wheeler automotive vehiclemarket (i.e. automobile vehicles other than two and three wheeler categories) stood at 26.1% in FY2008. The company is also the leader in the Indian commercialvehicles with a market share of 62.7% and is the second largest player in the Indian passenger vehicles market with a share of 14.2% in FY2008. Steady revenue g

rowth: The company recorded strong revenue growth during 2004-08. During this time, the revenues of the company grew at a CAGR of 27.1% to reach INR365,230.6 million (approximately $9,072.3 million) in FY2008 from INR139,696 million (approximately $3,096 million) in 2004. The strong revenue growth of the company has contributed to its market dominance. Research and development activities: Tata Motor has strong research and development (R&D) capability. The company incurred large expenditure for its R&D activities. The companys R&D activities focus on product development, environmental technologies and vehicle safety through its Engineering Research Centre (ERC). The ERC is one of the few government recognized inhouse automotive R&D centers in India. In the recent period, the ERC developedthe Tata Nano, an affordable family car. The strong R&D capability enables the company to build a broad range of vehicle portfolio and improves its competitive

strength in the automotive industry.


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Weaknesses:Decline in vehicle sales: Tata Motors recorded decline or marginal growth in itsvehicle sales in the last financial year. The company recorded a sale of 585,649 vehicles, a growth of 0.9% over last year. During the same time, the automotive industry in India recorded a growth of 10.4% to reach the total vehicle salesto 2,309,324 units. The overall market share of the company stood at 25.4% in 2008 as compared to a market share of 27.8% in 2007. The decline in sales would fu

rther affect the companys market share, and erode investors confidence. Employee productivity: Tata Motors posted weak revenues in proportion to the total numberof its employees. The revenue per employee of the group stood at INR10 million (approximately $0.24 million), significantly lower when compared to its global competitors such as Toyota Motor ($.73 million), and Nissan Motor ($.53 million).The weak revenue per employee of the company compared to the global auto majorsindicates its weaker productivity and operational inefficiency.

Opportunities:Product launches: Tata Motors has launched various new products during the lasttwo year period (200708). For instance in December 2007, Tata Motors introduced its new range of Medium and Heavy Commercial Vehicles. In March 2008, Tata Motors

(Thailand) launched the Tata Xenon 1-ton pickup truck at the annual Bangkok International Motor Show. In FY2008, the company launched the Indigo sedan and Indica with the Direct Injection Common Rail (DICOR) and Sumo Grande. Furthermore, the launch of its small car,NANO in January 2008 would further fuel its presence in the passenger vehicle market. Acquisition of Jaguar and Land Rover brands: These brands had sales operations in more than 100 countries with over 2,200 dealers. Acquisition of JLR provides the company with a strategic opportunity to acquire iconic brands, and increase the companys business diversity across markets andproduct segments.

Threats:Increasing competition: Tata Motors face intense competition from its domestic as well as foreign competitors including General Motors, Honda Motor, Maruti Udyo

g, Mitsubishi Motors, Fiat, Ford and so on. Competition is expected to intensifyfurther as Indian automotive manufacturers obtain greater access to debt and equity financing in the international capital markets or gain access to more


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advanced technology through alliances. Additionally, in recent years, the government of India has permitted automatic approvals for foreign equity ownership ofup to 100% in entities manufacturing vehicles and components in India. Environmental regulations: The company is subjected to extensive governmental regulationsregarding vehicle emission levels, noise, safety and levels of pollutants generated by its production facilities. These regulations are likely to become more stringent in the near future. In addition, Jaguar Land Rover has significant oper

ations in the US and Europe which have stringent regulations relating to vehicular emissions. The proposed tightening of vehicle emissions regulations will require significant costs for the company.

Major international ventures of TATA Motors in recent past are discussed below:1. TATA Daewoo Commercial Vehicle- In 2004, TATA Motors acquired the Daewoo Commercial Vehicle Company of South Korea. TATA remains India's largest heavy commercial vehicle manufacturer and TATA Daewoo is the 2nd largest heavy commercial vehicle


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manufacturer in South Korea. The reasons behind the acquisition were:

a) Company's global plans to reduce domestic exposure. The domestic commercial vehicle market is highly cyclical in nature and prone to fluctuations in the domestic economy. TATA Motors has a high domestic exposure of ~94% in the MHCV segment and ~84% in the light commercial vehicle (LCV) segment. Since the domestic commercial vehicle sales of the company are at the mercy of the structural econo m

ic factors, it is increasingly looking at the international markets. The companyplans to diversify into various markets across the world in both MHCV as well as LCV segments. b) To expand the product portfolio TATA Motors introduced the 25MT GVW TATA Novus from Daewoos (South Korea) (TDCV) platform. TATA plans to leverage on the strong presence of TDCV in the heavy-tonnage range and introduce products in India at an appropriate time. This was mainly to cater to the international market and also to cater to the domestic market where a major improvement inthe Road infrastructure was done through the National Highway Development Project. TATA Motors has jointly worked with TATA Daewoo to develop trucks such as Novus and World Truck 2. Hispano Carrocera- In 2005, sensing the huge opportunityin the fully built bus segment, TATA Motors acquired 21% stake in Hispano Carrocera SA, Aragonese bus manufacturing company with an option to acquire 100% holdi

ng. Hispano Carrocera is an established and reputed bus and coach manufacturer in Spain enjoying excellent reputation for developing high quality vehicles. It operates in two manufacturing locations namely, Zaragoza in Spain and Casablancain Morocco, North Africa.


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Hispano has proven competence in development of buses and coaches. With this deal Tata Motors acquired the license for technology and brand rights from Hispano.The total deal consisting of equity, debt and technology licensing amounted toabout Rs 70 crore to Tatas. This partnership gives both companies an opportunityto use their complementary strengths to create high-class transport solutions for intra-city and intercity mass transportation in Spain, India and many other countries around the world. Besides Tata Motors is also seeing this deal as a gat

eway into the highly competitive and matured European markets considering the success Hispano's bus range enjoys in these markets. Hispano enjoys a market shareof 25 per cent in the bus market in Spain and sells considerable numbers in Europe in addition to other countries outside Europe as well. Further, the Hispanodeal will help the Indian commercial vehicle giant grow in the bus and coach segment as the Daewoo acquisition helped it in trucks. This strategic alliance withHispano Carrocera gave TATA Motors access to its design and technological capabilities to fully tap the growing potential of this segment in India and other export markets, besides providing it with a foothold in developed European markets. 3. TATA Marco polo (TMML) - TATA Motors has formed a 51:49 joint venture in bus body building with Marco polo of Brazil. This joint venture is to manufactureand assemble fully built buses and coaches targeted at developing mass rapid tra

nsportation systems. The joint venture will absorb technology and expertise in chassis and aggregates from TATA Motors, and Marcopolo will provide know-how in processes and systems for bodybuilding and bus body design. TATA and Marcopolo have launched a low-floor city bus which is widely used by Delhi, Mumbai and Bangalore Transport Corporations. TMML JVs first assignment in India was to supply 500premium class low floor buses for Delhi Transport Corporation. Joint venture has started its operations at Dharwad, Karnataka & Lucknow, U.P. Future Plans: TMML has plans to set up the worlds biggest bus plant at Dharwad. It is aiming to cater to the fully built bus requirements of Indian mass as well as luxury markets. To compete in high volume, low cost market a vendor park has been establishedin Dharwad itself. The company plans to make 20,000 buses a year at its full capacity.


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4. TATA Xenon- TATA Xenon was released in late 2007. It was first displayed at the 2006 Bologna Motor Show. The car is assembled in Thailand by Tata-Thonburi JVand in Argentina by Tata-Fiat JV. The Xenon has been well received in Europe especially in Spain and Italy. SPRINT was the code name of the Project for development of Tata's World Pick-up (truck). World Pick-up market (other than USA) is dominated by Japanese Auto majors like Toyota, Isuzu, Mitsubishi, Nissan. As perthe study conducted by Tata Motors, there is a big opportunity for TML to grab s

ubstantial market share of world Pick-up market. Tata initiated an in-depth market study in various countries in Europe, Middle East, S Africa, Thailand, Australia, Latin America etc to understand needs of target segments for a new Pick-up.While a new product development timeline takes between 36 to 50 months, it is said that so far only Toyota has achieved the Timeline of 18 months. Hence, the name SPRINT which signifies and continuously reminded project team about the Speed of the project. The team worked round the clock relentlessly, applied principles of "Concurrent Engineering", distributed work load in 9 different countries in order to crash timeline by overlapping maximum possible key activities. The team delivered project in 17 monthsfrom styling freeze in Dec 05 to SOP ( Start ofProduction) in May 7. Bologna Motor Show 2006 (Dec) was the occasion when Xenonwas unveiled for public display and later in March 2007, it was also displayed a

t Geneva Motor Show 2007. Till date Xenon has been launched in 14 countries in Europe, Middle East, Africa and SE Asia. Tata Motors signed a joint venture withThonburi Automotive Assembly Plant Co. (Thonburi), the Thailandbased independentassembler of automobiles to manufacture, assemble and market pickup trucks in Dec06. The joint venture, in which Tata Motors holds 70% of the equity and Thonburi 30%, gets vehicles manufactured in Thonburis manufacturing facility. The jointventure facilitated Tata Motors address the Thailand market, the second largestpickup market in the world after the US. Both partners jointly manage the operations.


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5. TATA Fiat- The TATAs and Italian car giant Fiat kicked off their partnershipwith the former marketing Fiat cars since Mar06. Fiat branded cars are distributed by Tata through the Tata-Fiat dealer network. The partnership took off to thenext level in Dec06 with both the sides announcing the formation of a joint venture with aggregate investments of over Rs 4000 crore (over euro 665 million) in aphased manner to manufacture vehicles for the Indian and overseas markets. The50:50 joint venture enabled Fiat plant at Ranjangaon, Pune with capacities to pr

oduce in excess of 200,000 cars and 300,000 engines and transmissions yearly, atsteady state. The JV may be expanded to produce trucks as well. This strategicalliance with Fiat enables the two companies jointly to present a wider range ofproduct offerings to the Indian market. It enables Tata Motors to access worldclass powertrains from Fiat for its next generation car offerings while enhancingthe model line at its dealerships. Fiats Ranjangaon manufacturing facility is benchmarked against the global car manufacturers units in Turkey and Brazil. It compares well as the lowest-cost manufacturer, and Fiat will eventually source right-hand drive Linea cars from here for the UK and Australia. Fiat has a cost advantage of 14-17% over Brazil and Turkey due to localisation of parts and labour costs. Fiat had almost decided to quit the Indian market but for Fiat chief executive officer Sergio Marchionne and Tata group chairman Ratan Tata coming togethe

r in 2005. Such was the level of confidence among both the partners that investments began at least two years before even a formal agreement was signed. JV is already producing the Fiat Palio, Stile and Linea models and select Tata Indica models.


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Future Plans: The company is readying to launch the Grande Punto, a compact car,in the third quarter of the fiscal year- 200910. The second model will be TataMotors new three-box offering, code-named X1.

Planned launch of the Fiat Bravo is being delayed because of the economic slowdown. Fiat manufactures Tata Motors 1-tonne pick-up truck at its plant in Argentinafor Latin American and overseas markets. The JV is expected to break even by 20

11-12. 6. City Rover- The City Rover was a hatchback car model offered by MG Rover Group in the UK market. Launched in the Autumn of 2003, the car was a rebadged version of the Tata Indica. MG Rover group used to import TATA Indica from India and sold as City Rover in UK market. The City Rover's running costs were rather high, and its asking price was high compared with newer, better built and better specified rivals such as the Fiat Panda. MG Rover was reported to be payingTata 3,000 for each car and, despite each model featuring a Rover corporate noseand revised suspension settings, the buying public was not impressed by the 7,000starting price. Along with the rest of the MG Rover range, production of the City Rover ended in April 2005 when the company went into receivership, the last vehicles brought into the UK being purchased and sold on by a non-franchised discount dealer group. Although MG Rover was bought by Nanjing Automobile of China i

n July 2005, the company's new owners did not include the City Rover or indeed any direct successor in their plans for a new model range. This was one of the unsuccessful attempts of Tata Motors to go global.


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7. Exports Market (CV)- TATAs export its commercial vehicles to neighboring Asian countries like Nepal, Sri Lanka, Bangladesh, Afghanistan apart from South Africa and Middle East markets. It competes with the likes of Mercedes, Volvo, and Hyundai etc in Middle East markets.

8. World Truck- TATA Motors unveiled its World Truck range, developed jointly withTATA Daewoo Commercial Vehicles of South Korea in May09. The developing infrastr

ucture in India makes it possible for transporters to reap the benefit of truckswith higher power, speed and carrying capacity. The new range from Tata Motorswill meet those needs. It will also help it penetrate international markets moreeffectively and competitively.

Future Plans: The commercial launch of these trucks in India is scheduled duringJulySeptember09. They will debut in South Korea, South Africa, the SAARC countries and the Middle-East by the end of the fiscal. The trucks will be made at theJamshedpur facility and at Gunsan in South Korea. The company expects international volumes to be at par with numbers in India.


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9. TATA Nano- Conceived in 2003, Tata Motors had launched the much- hyped 'cheapest' car in India in Mar09. The car has cost over Rs 2,000 crore to the

company. The car is expected to boost the Indian economy, create entrepreneurialopportunities across India, as well as expand the Indian car market by 65%. Thecar was envisioned by Ratan Tata, Chairman of the Tata Group and Tata Motors, who has described it as an eco-friendly "people's car". For the first time, thanks

to Tata's Nano, India has been established as an R&D leader, and not just a low-cost hub known for cheap labor. It has shown to the world that India can be a technology leader. It is a great innovation, because innovation is all about thinking of the next decade and not the next quarter. The Tata Nano will certainly find big takers in India. However, it can have a market in the US, as well. If the car is enriched with high technology functions to make it an intelligent car,many in the US will look forward to own it. An intelligent car at $3000 would bea good A Promise is a Promise bargain after all, for many Americans. Tata's Nano shows that there is a huge opportunity for Indian companies to build profitable low-cost products and then take them to the US. Future Plans: Tata Motors willbe launching it in Nigeria within the next year and a half. In Nigeria, the Nano will cost 357,480 NGN (Rs 1.16 lakh), almost the same as its cost in India, ma

king it cheaper than even used cars in the country. According to TATA Motors officials, Nano will greatly benefit Nigerians as there is no proper public transport system in the country. Company is yet to decide whether the car would be assembled in Nigeria itself or if it would be made available as a Completely Built Unit (CBU). The company is planning to market Nano in other countries, but timelines, modes and countries are yet to be finalized. Earlier this year, the Tata Nano Europa (the European version of the Nano) was unveiled at the Geneva Auto Show. The Nano Europa will be launched in 2011. 10. TATA-JLR: TATA Motors bought the iconic Jaguar and Land Rover operations from Ford for 1.15 billion pounds in Mar- Apr08. Tata gained the


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rights to the Daimler, Lanchester, and Rover brand names. In addition to the brands, Tata Motors also gained access to 2 design centers and 3 plants in UK. Thekey acquisition would be of the intellectual property rights related to the technologies. With the acquisition of Jaguar and Land Rover (JLR), Tata Motors killed several birds with one stroke. The acquisition paves the way for the companys entry into the European car market and gives the company a comprehensive range ofmodels ranging from the luxury Jaguar to the $2,500 Nano. It provides an entry

point into Indias growing luxury car market which gives new impetus to the companys development program as well and provides a captive customer base for the component companies of the Tatas. In the long-run TATA Group and TATA Motors footprintin South-East Asia should help Jaguar/Land Rover diversify their geographic dependence from US (30% of volumes) and Western Europe (55% of volume). Analysts believe that TATAs ownership of JLR will open doors for outsourcing of parts from India, particularly from the current pool of suppliers who service TATA Motors inIndia.

Present and Future Plans:A year after Tata group purchased Jaguar and Land Rover, it launched the Britishiconic luxury brands in the Indian market. The India foray comes at a time when

worldwide sales of luxury cars are falling. The global meltdown dragged JLR into huge losses as consumers halted purchases. Sales, after the $2.5 billion takeover by Tata Motors last June, dropped a third to 1.67 lakh vehicles. The bridge from the Nano to Jaguar XF is probably the biggest that exists in the industry. A$2,500 car and a $100,000 car: no other company in the world has a portfolio that wide. Why JLR? Long term strategic commitment to automotive sector Opportunity to participate in two fast growing auto segments Increased business diversityacross markets and products Land rover provides a natural fit for TMLs SUV segment Jaguar offers a range of performance/luxury vehicles to broaden the brand portfolio Benefits from component sourcing, design services and low cost engineering.


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Impact of Current Global Slowdown on TATA-JLR Deal: We went too far with JLR: Ratan Tata Tata Sons Chairman Ratan Tata recently said he may have overstretched himself in paying 1.15 billion pounds for Jaguar Land Rover just as a recession loomed. A year after the Tata group took over the two of Britains most iconic automobile brands, Jaguar and Land Rover, it is faced with newer and bigger challengesthan it would have expected when it paid $2.3 billion to Ford for the acquisitions on March 26, 2008. In FY 2008-09, Tata Motors Ltd posted its first annual lo

ss in at least eight years after sales at the luxury units, Jaguar and Land Rover plunged amid the global recession. The consolidated net loss was Rs 2,500 crore in the year ended 31 March, 2009 compared with a net income of Rs 2,200 crorebillion a year ago. Ratan Tata is slashing investments by as much as 38% in theyear to March on slow economic growth. At the time of acquisition of JLR by TATAMotors, there were some who called for caution. They pointed out that buying into an automobile major when the market for automobiles was set for a downturn might not reflect good business sense. Moreover, post acquisition, debt at the level of both parent and the United Kingdom subsidiaries in the TATA group was slated to rise sharply. Unfortunately for Tatas, the worst fear of the skeptics hascome to pass. Within months of the acquisition, the world witnessed the onset ofa financial crisis that triggered a credit crunch and precipitated a real econo

my recession. Industries such as steel and automobiles were among the worst affected. This had two implications. First, the sales and revenues of JLR were far short of expectations, making it difficult for Tatas to meet commitment on theirdebt and reduce the degree of leverage. Second, with much of this debt being ofa bridge loan kind, loans that mature and cannot be repaid have to be refinancedand rolled over to prevent default. Given the current circumstances, this is difficult, as Tatas discovered this May, when the $3 bn it had borrowed to financeacquisition of JLR was due for refinancing. After the Tatas acquired the company, business challenges were mostly a result of adverse market conditions. In thefirst half of 2008, Jaguars sales volume was 11.2 % more than in the same periodin 2007 while Land Rovers was 0.6 % ahead of 2007. At the end of 2008, Jaguar was 8.2 % ahead of 2007 for the year, while Land Rover had felt the impact of thedownturn and its full-year sales were 17.6 % less than in 2007. In the first two

months of 2009, Jaguar was 6.9 % ahead of 2008 and Land Rover 45 % down when


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compared with the same period last year. There have been a series of nonproduction days at all three of its UK assembly plants Castle Bromwich and Solihull in the West Midlands and Halewood on Merseyside. Each plant lost an average of 25 days production, which equated to a volume reduction of approximately 25 per cent month on month. A worsening economic situation could lead to further job losses and even plant closures at Jaguar Land Rover (JLR) in Britain. Tatas bankers are seeking 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 andstop it running out of cash. The Tatas are trying to persuade the British government to stand guarantee for loans that they plan to seek from the UK banks to bail out JLR. The British government has been reluctant to provide these loan guarantees so far. If the UK governments help does not come soon, Tata Motors will have to cut down its investment plans for Jaguar Land Rover (JLR) with possible job losses and plant closures. While Tata looks to sustain JLR through the downturn, the UK government

s support is crucial as JLR wants it to guarantee a pound 340 million European Investment Bank loan sanctioned in April. Although JLR has the option of getting guarantees from private banks, it may work out to be an expensive proposition. To get the government

s help, Tata may have part with some equity interest in JLR, besides giving board representation. According to a recen

t report in The Economic Times, the company is negotiating at the moment and ifthere was a large financial package from the UK government to the company then there would be a commensurate level of representation on the board. Despite the challenges, there have been some good news, the companys 14,000odd workers agreedto a two-year pay freeze on condition of no compulsory layoffs. This is expectedto save the company up to 68 million a year. The company also bagged a significant order from China for supplying 13,000 cars worth 600 million over the next three years. More recently, the UK government approved a grant of 27 million (Rs 192crore) to JLR for producing a new ecofriendly car based on Land Rovers LRX Concept. Luxembourg-based European Investment Bank is also considering giving a loanof 275 million (Rs 2,100 crore) for research to reduce the CO2 emissions from JLRsfuture products. What is remarkable is that the Tata group has been able to ride the waves and come ashore safely this time as well. Tata Motors returned $1.11

bn of its original bridge loan by mobilizing funds through a rights issue, launching a fixed deposit scheme and by selling the shares of Tata Steel it held. Second, the Tata group has mobilized the support of the Indian government. Even when the group embarked on its ambitious overseas acquisition strategy, there wasevidence that it had the backing of the Indian government, which too was seekingto build India itself as a global brand. Tatas mobilized Rs 42 bn through bondmarkets with the help of


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government-owned State Bank of India. Tatas are also in talks with defense establishment to obtain secure orders for the Land Rover. Finally, the Tatas have used innovation to obtain support from the Indian public for its UK operations. Tatas launched Nano in Apr09 and received 203,000 advance orders & raised Rs 25 bn from Indian public. This money was in essence a loan from public at large & Tataswill pay interest rate on the same. This money is also crucial to the Tatas survival strategy. In sum, despite its grievous errors in the form of the crisiseve,

debt-financed acquisition JLR, the Tata group has escaped a group-wide crisis by leveraging its brand, the Indian government and the Indian public. That is indeed remarkable, even if fortuitous to some degree.


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RecommendationsIndustry analysts expect GM to sell the Hummer brand in 2009 and without a seller in sight, there is a real possibility that the brand will cease to exist. A push in developing cutting-edge products in the Land Rover brand could enable Tatato capture Hummer customers as they look for comparable - or better products. Company needs to focus on these 3 aspects to attract the consumers of the highendmarket products: 1. Brand Appeal and Endorsement 2. Performance Characteristics

3. Quality TML can greatly enhance customers perceptions of these three criteriawith targeted increased investments. Brand appeal, performance and quality areall functions of the investments made in product development and marketing. As competitors such as Volvo, Saab, Hummer and others fail to maintain investments in either development or marketing, this leaves the door open for TML to capitalize and gain both market share and momentum. TML is in a unique position to invest given the company

s strong balance sheet and overall financial health. The twoways firms compete are by either a differentiation strategy or a low cost strategy. However, as we

ve seen the route TML has taken involves competing on both strategies. While the Nano targets the price conscious common man, the Jaguar Land Rover deal shows us that TML is now targeting brand conscious, high-end consumers. TML needs to have a similar differentiated strategies focusing separately o

n these brands. TMLs vision is to be best in the manner in which we operate, bestin the products we deliver and best in our value systems and ethics. TML has cometo be known as an innovator in the passenger car segment not just in manufacturing but along multiple areas along the value chain. The Tata Indica and Tata Nano are prime examples of the companys innovation capabilities and bear testimony to the strength of the companys R&D efforts. This innovation fuelled growth coupled with strategic acquisitions is expected to catapult the company to a preeminent position internationally.


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References: www.tata.com www.tatamotors.com http://en.wikipedia.org/wiki/Tata_motors http://en.wikipedia.org/wiki/Tata_group http://en.wikipedia.org/wiki/Indian_automobile_industry http://en.wikipedia.org/wiki/Tata_Xenon www.rediff.com www.ndtv.com Kelly School of Business Report on Tata Motors Limited Comprehensive Strategic Analysis IHS Global Insight Report: India (Automotive) - July09 The Economic Times


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