tata motors (futuristik group 5 a)

8/8/2019 Tata Motors (Futuristik Group 5 a)

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A

PROJECT REPORT ON

TATA MOTORS: GLOBAL FOOTPRINT

COMPANY:LOGO

MENTORS NAME:- PROF. MEGHNA SHARMA

TEAM MEMBERS NAME:-

DEEPAKKUMARTHAKUR PREETI SHARMA HARMEET KAURMONA HONEYDOGRA


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TATA MOTORS:GLOBAL FOOTPRINT

Submitted By:- Deepak Thakur, Preeti Sharma, Harmeet Kaur, Mona, Page 2HoneyDogra.

TABLE OF CONTENT

ExecutiveSummary..................................................................................................3 Indian Automobile Industry.....................................................................................4 Introduction..............................................................................................................9 Objectives................................................................................................................11 Findings...................................................................................................................12 TATAMotors- Making Waves Internationally......................................................14 Impact of Global Slowdown on TATA-JLRDeal.................................................19 Conclusion...............................................................................................................21 Bibliography............................................................................................................23


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EXECUTIVE SUMMARY

The report talks about the Indian automobile industry in general and Indian automobile giantTATAMotors 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 TATAMotors expansion of internationalbusiness in the recent past, at present as well as its future plans. We have also discussed theimpact of current financial meltdown on the recent international ventures of the company.

The company is rapidly increasing its global footprint and is aiming to match the standards

of international automobile manufacturers in next 3 to 5 years. This rise to the level of aworld-class automotive manufacturer would involve a large quantifiable increase in revenuesfrom outside India with a focus on certain foreign markets. Currently international businesscontributes 18.4% to companys revenues. Company is aiming to increase it by 200% in nearfuture to reduce its dependence on one single economy and one single business cycle. Thisambition of the company has led to numerous joint ventures and increased activity incountries like the U.K., South Africa, South Korea, Thailand, Brazil and Spain, as well as thecompany is listing on the NYSE.

With the recent acquisition of Jaguar Land Rover (JLR) from the Ford Motor company inearly 2008, the company has entered into the world of high-end luxury brands. Customers of

high-end luxury brands value image and exclusivity factors, while image and exclusivityconflict with the proposition of TMLs other recent venture, the inexpensive Nano. In thismanner, the decision to compete in both the high-end luxury and low-end economy marketscertainly creates a big and audacious task ahead for TML. If proven successful, this strategywould provide the company with high margin (JLR) as well as high volume (Nano)revenues. These two revenue streams, if proven compatible, could mitigate each othersrisks.


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INDIAN AUTOMOBILE INDUSTRY

Hailed as the industry of industries by PeterDrucker, the founding father of the study ofmanagement, in 1946, the automobile industry had evolved continuously with changingtimes from craft production in 1890s to mass production in 1910s to lean productiontechniques in the 1970s.

The automotive industry in India grew at a computed annual growth rate (CAGR) of 11.5percent over the past five years, the Economic Survey 2008-09 tabled in parliament on 2ndJuly09 said.

The industry 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 statementsaid.

The automobile industry, which was plagued by the economic downturn amidst a creditcrisis, managed a growth of 0.7 percent in 2008-09 with passenger car sales registering 1.31percent 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 toMaruti 800 to latest M&M Xylo. The industry is highly competitive with a number of globaland Indian companies present today. It is projected to be the third largest auto industry by2030 and just behind to US & China, according to a report. The industry is estimated to be aUS$ 34 billion industry.

Indian Automobile industry can be divided into three segments i.e. two wheeler, threewheeler & four wheeler segment. The domestic two-wheeler market is dominated by Indianas well as foreign players such as Hero Honda, Bajaj Auto, Honda Motors, TVS Motors, andSuzuki etc. Maruti Udyog and Tata Motors are the leading passenger car manufacturers inthe country. And India is considered as strategic market by Suzuki, Yamaha, etc.Commercial Vehicle market is catered by players like Tata Motors, Ashok Leyland, Volvo,Force Motors, EicherMotors etc.

The major players have not left any stone unturned to be global. Major of the players havegot into the merger activities with their foreign counterparts. Like Maruti with Suzuki, Herowith 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 to23 lakh units in 2007-08 Targeted to be of $ 145 Billion by 2016 Exports increased from 84,000 units in 2002-03 to 280,000 units in 2007-08.

Porters Five Forces Analysis of Indian AutomobileSector :-

1. Industry Rivalry:- Industry Concentration:

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

High Fixed costs:

When total costs are mostly fixed costs, the firm must produce capacity to attain the lowestunit costs. Since the firm must sell this large quantity of product, high levels of productionlead to a fight for market share and results in increased rivalry. The industry is typicallycapital intensive and thus involves high fixed costs.

Slow market growth:

In growing market, firms can improve their economies. Though the market growth has beenimpressive in the last few years (about 8 to 15%), it takes a beat in even slight economic

disturbances as it involves a luxury good. Aggressive pricing is needed to sustain growth insuch situations.

Diversity of rivals:

Industry becomes unstable as the diversification increases. In this case the diversity of rivalsis moderate as most offer products which are close to standard versions and the competitors


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are also mostly similar in strength Industry, Rivalry Bargaining PowerofCustomers, Bargaining Power of Suppliers, Threat of New Entrants ,Threat ofSubstitutes.

Highly competitive industry:

The presence of many players of about the same size little differentiation betweencompetitors, and a very mature industry with very little growth were the features of a highlycompetitive industry. Higher the competition in the industry lower would be the profitmargin. To remain ahead in competition, auto-makers were tempted to offer value addedservices 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 turnprotect the profits of the existing firms. Based on the present profit levels in the market, one

can expect the entrance of new firms into the market or not. The entrance is however alsoaffected by the start-up costs.

Economies of scale:

The Minimum Efficient Scale (MES) is the point at which unit costs are minimized. Thegreater the difference between the MES and the entry unit cost, greater is the barrier.Economies of scale are becoming increasingly important as competition is driving the profitmargins to lower levels. Also being a capital intensive industry economies of scale haveimportant consequence.

Government policies:-

y Automobile Industry was delicensed in July 1991 with the announcement of theNew Industrial Policy.

y The passenger car industry was delicensed in 1993. No industrial licence is requiredfor setting up of any unit for manufacture of automobiles except in some specialcases

y The norms forForeign Investment and import of technology have been progressivelyliberalized over the years for manufacture of vehicles including passenger cars inorder to make this sector globally competitive

y At present 100% Foreign Direct Investment (FDI) is permissible under automaticroute in this sector including passenger car segment. The import oftechnology/technological upgradation on the royalty payment of 5% without anyduration limit and lump sum payment ofUSD 2 million is allowed under automaticroute in this sector

y The automotive industry comprising of the automobile and the auto componentsectors has made rapid strides since delicensing and opening up of the sector to FDIin 1991


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y The industry had an investment of about Rs. 50,000 crore in 2002-03 which has goneup to Rs. 80,000 crore by the year 2007. The automotive industry has already attaineda turnover ofRs. 1,65,000 crore (34 billion USD).

y The industry provides direct and indirect employment to 1.31 crore people. Thecontribution 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 indirecttaxes of the Government. With all the policies regarding the FDI and Tariff barriersas mentioned above, it has become easier for the foreign players to enter the Indianautomobile industry.

3. Threat of Substitutes:- The replacement market is characterized by the presence of several small-scale supplierswho score over the organized players in terms of excise duty exemptions and loweroverheads.

A products price elasticity is affected by the presence of substitutes as its demand isaffected by the change in the substitutes prices.

The cost of the automobiles along with their operating costs was driving customers to lookfor alternative transportation options.

The new technologies available also affect the demand of the producte.g.: In case ofMarutis products, the threat of substitutes is high. The competition is intenseas several players have products in the categories given by Maruti. However, in the 800ccrange it is the market leader and the threat of substitute products is low. Price performancecomparison favors heavily towards Maruti in most product categories. Also the high

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

4. Bargaining Power of Suppliers:-

Suppliers can influence the industry by deciding on the price at which the rawmaterials 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 immediateimpact on the product price.

The industry being capital intensive switching costs of suppliers is high, other than steel asraw material which is highly price sensitive and the firm may easily move towards a supplierwith lower cost .

5. Bargaining Power of Buyers:-

It specifies the impact of customers on the product.


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When buyer power is strong, the buyer is the one who sets the price in the market.Here there is purchases of large volumes. There is prevalence of alternative options.

Price sensitive customers were some of the factors that determined the extent of

influence of the buyers in this industry e.g.: In the case ofMaruti, the sales volumes haveshown increasing trend over past so many years. The customers are more or lessconcentrated in metros or other tier two cities. The industry is also concentrated in theseregions mostly. Most of them are have good amount of knowledge about the product. Exceptthe 800cc range in other categories brand loyalty is only moderate. Also it is difficult tomeasure since repurchases are rare. Product differentiation is high as there are manycategories in the passenger vehicle segment. Buyers get incentives in the form of costdiscounts and better after sales services.


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INTRODUCTION

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 ofthe most respected groups in the world. It has interests in steel, automobiles, informationtechnology, communication, power, tea and hospitality. The Tata Group has operations inmore than 85 countries across six continents and its companies export products and servicesto 80 nations. In the past few years, the TATA group has led the growing appetite amongIndian companies to acquire businesses overseas in Europe, the United States, Australia andAfrica - some even several times larger - in a bid to consolidate operations and emerge as thenew 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 leadershipwith trust, the Tata group is spreading its footprint globally through excellence andinnovation

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 integralelement in an overall strategy, depending on the competitive dynamics of the industry inwhich it operates. Exports from India remain the cornerstone of the Tata groupsinternational business, but different Tata companies are increasingly investing in assets

overseas through greenfield projects (such as in South Africa, Bangladesh and Iran), jointventures (in South Africa, Morocco and China) and acquisitions.

Acquisitions are a crucial component of the global expansion of Tata enterprises. Over thepast eight years the group has made overseas acquisitions of $18 billion. Among the biggerdeals on this front have been Tetley, BrunnerMond, Corus, Jaguar and Land Rover in theUK, Daewoo Commercial Vehicles in South Korea, NatSteel in Singapore, and Tyco GlobalNetwork 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 of

strategic importance in the years ahead. The regions are North America, UK, China, theNetherlands, Germany, SouthAfrica, members of the GulfCooperation Council, Brazil,Vietnam, Thailand and Sri Lanka. Ratan Tata, Chairman, Tata Sons, sums up the Tatagroups efforts to internationalize its operations thus: I hope that a hundred years from nowwe will spread our wings far beyond India, that we become a global group, operating inmany countries, an Indian business conglomerate that is at home in the world, carrying thesame sense of trust that we do today.


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TATA MOTORS

TATAMotors is the flagship company of the TATA group & is India's largest automobileplayer, with revenues of $7.2 billion in 2006-07. With over 4 million TATA vehicles plying

in India, it is the leader in commercial vehicles and the second largest in passenger vehicles.Previously TATAEngineering and Locomotive Company (Telco), TATAMotors is listed onthe New York StockExchange in 2004.

Competition at Home

TATAMotors is vulnerable to greater competition at home. Foreign vehicle makersincluding Daimler, Nissan Motor, Volvo and MAN AG have struck local alliances for abigger presence.

TATAMotors, which has a joint venture with Fiat for cars, engines and transmissions in

India, is also facing heat from top car makerMaruti 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 in December 2006 expressed theview that the policy to support its companies and the improved financial profile of itsentities also enhances the overall financial flexibility of TATAMotors.


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OBJECTIVES

TATAMotors expansion of international business in the recent past, at present, as well asits future plans.

The impact of current financial meltdown on the recent international ventures of thecompany.

Analysis on to increase companys revenue by 200% in near future through various Joint-ventures & Mergers internationally.

Analysis on TMLs decision to compete in both the high-end luxury and low-end economymarkets.


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FINDINGS

SWOT Analysis

STRENGTHSStrong domestic playerSteady revenue growthR&DActivities

WEAKNESSESDecline in vehicle salesEmployee ProductivityImage of low quality makers

OPPORTUNITIESInternational GrowthNew Product LinesAcquisition of JLRbrands

THREATS

Competition from Global playersGlobal Economic FactorsEnvironmental Regulations

Strengths:Strong domestic player: TataMotors is Indias largest automobile manufacturer by revenue.

The companys market share in the Indian four-wheeler automotive vehicle market (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 commercial vehicles with a market share of62.7% and is the second largest player in the Indian passenger vehicles market with a shareof 14.2% in FY2008.Steady revenue growth: The company recorded strong revenue growth during 2004-08.During this time, the revenues of the company grew at a CAGRof 27.1% to reachINR365,230.6 million (approximately $9,072.3 million) in FY2008 from INR139,696million (approximately $3,096 million) in 2004. The strong revenue growth of the companyhas 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. Thecompanys R&D activities focus on product development, environmental technologies andvehicle safety through its Engineering Research Centre (ERC). The ERC is one of the fewgovernment recognized in- house automotive R&D centers in India. In the recent period, theERC developed the Tata Nano, an affordable family car. The strong R&D capability enablesthe company to build a broad range of vehicle portfolio and improves its competitive


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strength in the automotive industry.

Weaknesses

Decline in vehicle sales:

Tata Motors recorded decline or marginal growth in its vehicle 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 reachthe total vehicle sales to 2,309,324 units. The overall market share of the company stood at25.4% in 2008 as compared to a market share of 27.8% in 2007. The decline in sales wouldfurther affect the companys market share, and erode investors confidence.Employee productivity:Tata Motors posted weak revenues in proportion to the total number of its employees. Therevenue per employee of the group stood at INR10 million (approximately $0.24 million),significantly lower when compared to its global competitors such as Toyota Motor ($.73million), and Nissan Motor ($.53 million). The weak revenue per employee of the companycompared to the global auto majors indicates its weaker productivity and operational

inefficiency.

Opportunities:

Product launches: Tata Motors has launched various new products during the last two yearperiod (200708). For instance in December 2007, Tata Motors introduced its new range ofMedium and Heavy Commercial Vehicles. In March 2008, Tata Motors (Thailand) launchedthe Tata Xenon 1-ton pickup truck at the annual Bangkok International Motor Show. InFY2008, the company launched the Indigo sedan and Indica with the Direct InjectionCommon 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 JLRprovides the company with astrategic opportunity to acquire iconic brands, and increase the companys business diversityacross markets and product segments.

Threats Increasing competition: Tata Motors face intense competition from its domestic aswell as foreign competitors including General Motors, Honda Motor, Maruti Udyog,MitsubishiMotors, Fiat, Ford and so on. Competition is expected to intensify further asIndian automotive manufacturers obtain greater access to debt and equity financing in theinternational capital markets or gain access to more advanced technology through alliances.Additionally, in recent years, the government of India has permitted automatic approvals forforeign equity ownership of up to 100% in entities manufacturing vehicles and components

in India.Environmental regulations: The company is subjected to extensive governmentalregulations regarding vehicle emission levels, noise, safety and levels of pollutants generatedby its production facilities. These regulations are likely to become more stringent in the nearfuture.In addition, Jaguar Land Rover has significant operations in the US and Europe which havestringent regulations relating to vehicular emissions. The proposed tightening of vehicleemissions regulations will require significant costs for the company.


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TATA Motors- Making Waves Internationally :-Major international ventures of TATAMotors in recent past are discussed below:-

1. TATA Daewoo Commercial Vehicle- In 2004, TATAMotors acquired the DaewooCommercial Vehicle Company of South Korea. TATA remains India's largest heavycommercial vehicle manufacturer and TATADaewoo is the 2nd largest heavy commercialvehicle manufacturer in South Korea.

The reasons behind the acquisition were:-

Company's global plans to reduce domestic exposure. The domestic commercialvehiclemarket is highly cyclical in nature and prone to fluctuations in the domesticeconomy. TATAMotors has a high domestic exposure of ~94% in the MHCVsegment and ~84% in the light commercial vehicle (LCV) segment. Since thedomestic commercial vehicle sales of the company are at the mercy of the structuralecono mic factors, it is increasingly looking at the international markets. Thecompany plans to diversify into various markets across the world in both MHCV aswell as LCV segments.

To expand the product portfolio TATAMotors introduced the 25MT GVW TATANovus from Daewoos (South Korea) (TDCV) platform. TATA plans to leverage onthe strong presence of TDCV in the heavy-tonnage range and introduce products inIndia at an appropriate time. This was mainly to cater to the international market andalso to cater to the domestic market where a major improvement in the Roadinfrastructure was done through the National Highway Development Project. TATAMotors has jointly worked with TATADaewoo to develop trucks such as Novus andWorld Truck.

2. Hispano Carrocera- In 2005, sensing the hugeopportunity in the fully built bus segment,TATAMotors acquired 21% stake in Hispano Carrocera SA, Aragonese bus manufacturingcompany with an option to acquire 100% holding. Hispano Carrocera is an established andreputed bus and coach manufacturer in Spain enjoying excellent reputation for developinghigh quality vehicles. It operates in two manufacturing locations namely, Zaragoza in Spainand Casablanca in Morocco, North Africa. Hispano has proven competence indevelopment of buses and coaches. With this deal Tata Motors acquired the license fortechnology and brand rights from Hispano. The total deal consisting of equity, debt andtechnology licensing amounted to about Rs 70 crore to Tatas. This partnership gives bothcompanies an opportunity to use their complementary strengths to create high-class transportsolutions 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 gateway into thehighly competitive and matured European markets considering the success Hispano's busrange enjoys in these markets.Hispano enjoys a market share of 25 per cent in the bus market in Spain and sellsconsiderable numbers in Europe in addition to other countries outside Europe as well.Further, the Hispano deal will help the Indian commercial vehicle giant grow in the bus andcoach segment as the Daewoo acquisition helped it in trucks. This strategic alliance with


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Hispano Carrocera gave TATAMotors access to its design and technological capabilities tofully tap the growing potential of this segment in India and other export markets, besidesproviding it with a foothold in developed European markets.

3. TATA Marcopolo (TMML) - TATAMotors has formed a 51:49 joint venture in bus

body building with Marcopolo ofBrazil. This joint venture is to manufacture and assemblefully- built buses and coaches targeted at developing mass r apid transportation systems. Thejoint venture will absorb technology and expertise in chassis and aggregates from TATAMotors, and Marcopolo will provide know-how in processes and systems for bodybuildingand bus body design. TATA and Marcopolo have launched a low-floor city bus which iswidely used by Delhi, Mumbai and Bangalore Transport Corporations. TMML JVs firstassignment in India was to supply 500 premium class low floor buses forDelhi TransportCorporation. 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 tothe fully built bus requirements of Indian mass as well as luxury markets. To compete inhigh volume, low cost market a vendor park has been established in Dharwad itself. Thecompany plans to make 20,000 buses a year at its full capacity.

4. TATA Xenon- TATA Xenon was released in late 2007. It was first displayed at the 2006Bologna Motor Show. The car is assembled in Thailand by Tata-Thonburi JV and inArgentina by Tata-Fiat JV. The Xenon has been well received in Europe especially in Spainand 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 per the study conducted by Tata Motors, there is abig opportunity for TML to grab substantial market share of world Pick-up market. Tatainitiated 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 newPick-up. While a new product development timeline takes between 36 to 50 months, it is saidthat so far only Toyota has achieved the Timeline of 18 months. Hence, the name SPRINTwhich signifies and continuously reminded project team about the Speed of the project. Theteam worked round the clock relentlessly, applied principles of "Concurrent Engineering",distributed work load in 9 different countries in order to crash timeline by overlappingmaximum possible key activities. The team delivered project in 17 monthsfrom stylingfreeze in Dec 05 to SOP ( Start ofProduction) inMay 7. Bologna Motor Show 2006 (Dec)

was the occasion when Xenon was unveiled for public display and later inMarch 2007, itwas also displayed at Geneva Motor Show 2007. Till date Xenon has been launched in 14countries in Europe, Middle East, Africa and SEAsia. Tata Motors signed a joint venturewith Thonburi Automotive Assembly Plant Co. (Thonburi), the Thailand-based independentassembler of automobiles to manufacture, assemble and market pickup trucks in Dec06. Thejoint venture, in which Tata Motors holds 70% of the equity and Thonburi 30%, getsvehicles manufactured in Thonburis manufacturing facility. The joint venture facilitatedTata Motors address the Thailand market, the second largest pickup market in the world after


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the US. Both partners jointly manage the operations.5. TATA Fiat- The TATAs and Italian car giant Fiat kicked off their partnership with theformer marketing Fiat cars since Mar06. Fiat branded cars are distributed by Tata throughthe Tata-Fiat dealer network. The partnership took off to the next level in Dec06 with boththe sides announcing the formation of a joint venture with aggregate investments of overRs

4000 crore (over euro 665 million) in a phased manner to manufacture vehicles for theIndian and overseas markets. The 50:50 joint venture enabled Fiat plant at Ranjangaon, Punewith capacities to produce in excess of 200,000 cars and 300,000 engines and transmissionsyearly, at steady state. The JV may be expanded to produce trucks as well.

This strategic alliance with Fiat enables the two companies jointly to present a wider rangeof product offerings to the Indian market. It enables Tata Motors to access world-classpowertrains from Fiat for its next generation car offerings while enhancing the model line atits dealerships. Fiats Ranjangaon manufacturing facility is benchmarked against the globalcar manufacturers units in Turkey and Brazil. It compares well as the lowest-costmanufacturer, and Fiat will eventually source right-hand drive Linea cars from here for the

UKand Australia. Fiat has a cost advantage of 14-17% overBrazil and Turkey due tolocalisation of parts and labour costs.

Fiat had almost decided to quit the Indian market but forFiat chief executive officer SergioMarchionne and Tata group chairman Ratan Tata coming together in 2005. Such was thelevel of confidence among both the partners that investments began at least two years beforeeven a formal agreement wassigned. JV is already producing the Fiat Palio, Stile and Linea models and select Tata Indicamodels.

Future Plans:

The company is readying to launch Tata Motors new three-box offering, code-named X1.Planned launch of the Fiat Bravo is being delayed because of the economic slowdown. Fiatmanufactures Tata Motors 1-tonne pick-up truck at its plant in Argentina for LatinAmerican and overseas markets. The JV is expected to break even by 2011-12.

6. City Rover- The City Rover was a hatchback car model offered by MG Rover Group inthe UKmarket. Launched in the Autumn of 2003, the car was a rebadged version of the TataIndica. MG Rover group used to import TATA Indica from India and sold as City Rover inUKmarket. The City Rover's running costs were rather high, and its asking price was highcompared with newer, better built and better specified rivals such as the Fiat Panda. MG

Rover was reported to be paying Tata 3,000 for each car and, despite each model featuringa Rover corporate nose and revised suspension settings, the buying public was not impressedby the 7,000 starting price. Along with the rest of the MG Rover range, production of theCity Rover ended in April 2005 when the company went into receivership, the last vehiclesbrought into the UKbeing purchased and sold on by a non-franchised discount dealer group.Although MG Rover was bought by Nanjing Automobile ofChina in July 2005, thecompany's new owners did not include the City Rover or indeed any direct successor in theirplans for a new model range. This was one of the unsuccessful attempts of Tata Motors to go


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global. Fiat Linea- Distributed by TATAMotors in India.

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

East markets.

8.World Truck- TATAMotors unveiled its World Truck range, developed jointly withTATADaewoo Commercial Vehicles of South Korea in May09. The developinginfrastructure in India makes it possible for transporters to reap the benefit of trucks withhigher power, speed and carrying capacity. The new range from Tata Motors will meet thoseneeds. 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 July-September09. Theywill debut in South Korea, South Africa, the

SAARC countries and the Middle-East by the end of the fiscal. The trucks will be made atthe Jamshedpur facility and at Gunsan in South Korea. The company expects internationalvolumes to be at par with numbers in India.

9. TATA Nano-Conceived in 2003, Tata Motors had launched the much- hyped 'cheapest'car in India in Mar09. The car has cost overRs 2,000 crore to the company. The car isexpected to boost the Indian economy, create entrepreneurial-opportunities across India, aswell as expand the Indian car market by 65%. The car 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 anR&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 aboutthinking 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 intheUS, as well. If the car is enriched with high technology functions to make it an intelligentcar, many in the US will look forward to own it. An intelligent car at $3000 would be a good.APromise is a Promise bargain after all, for many Americans. Tata's Nano shows that thereis a huge opportunity for Indian companies to build profitable low-cost products and thentake them to the US.

Future Plans:

Tata Motors will be 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, making itcheaper than even used cars in the country. According to TATAMotors officials, Nano willgreatly 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 wouldbe made available as a Completely Built Unit (CBU). The company is planning to marketNano in other countries, but timelines, modes and countries are yet to be finalized. Earlierthis year, the Tata Nano Europa (the European version of the Nano) was unveiled at theGeneva Auto Show. The Nano Europa will be launched in 2011.


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10. TATA-JLR: TATAMotors bought the iconic Jaguar and Land Rover operations fromFord for 1.15 billion pounds in Mar- Apr08. Tata gained the rights to the Daimler,Lanchester, and Rover brand names. In addition to the brands, Tata Motors also gainedaccess to 2 design centers and 3 plants in UK. The key 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 withone stroke. The acquisition paves the way for the companys entry into the European carmarket and gives the company a comprehensive range of models ranging from theluxuryJaguar to the $2,500 Nano. It provides an entry point into Indias growing luxury carmarket which gives new impetus to the companys development program as well andprovides a captive customer base for the component companies of the Tatas. In the long-runTATA Group and TATAMotors footprint in South-East Asia should help Jaguar/LandRover diversify their geographic dependence from US (30% of volumes) and WesternEurope (55% of volume). Analysts believe that TATAs ownership of JLRwill open doors

for outsourcing of parts from India, particularly from the current pool of suppliers whoservice TATAMotors in India.

Present and Future Plans:

A year after Tata group purchased Jaguar and Land Rover, it launched the British iconicluxury brands in the Indian market. The India foray comes at a time when worldwide sales ofluxury cars are falling. The global meltdown dragged JLR into huge losses as consumershalted purchases. Sales, after the $2.5 billion takeover by Tata Motors last June, dropped athird 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 segmentsIncreased business diversity across 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 Global Slowdown on TATA-

JLR Deal

We went too far with JLR : Ratan Tata & Tata Sons Chairman Ratan Tata recently said hemay have overstretched himself in paying 1.15 billion pounds for Jaguar Land Rover just asa recession loomed.

A year after the Tata group took over the two ofBritains most iconic automobile brands,Jaguar and Land Rover, it is faced with newer and bigger challenges than it would haveexpected 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 loss in at least eight years after salesat the luxury units, Jaguar and Land Rover plunged amid the global recession. Theconsolidated net loss was Rs 2,500 crore in the year ended 31 March, 2009 compared with a

net income ofRs 2,200 crore billion a year ago. Ratan Tata is slashing investments by asmuch as 38% in the year to March on slow economic growth.

At the time of acquisition of JLRby TATAMotors, there were some who called for caution.They pointed out that buying into an automobile major when the market for automobiles wasset for a downturn might not reflect good business sense. Moreover, post acquisition, debt atthe level of both parent and the United Kingdom subsidiaries in the TATA group was slatedto rise sharply.

Unfortunately for Tatas, the worst fear of the skeptics has come to pass. Within months ofthe acquisition, the world witnessed the onset of a financial crisis that triggered a creditcrunch and precipitated a real economy recession. Industries such as steel and automobileswere among the worst affected. This had two implications. First, the sales and revenues ofJLRwere 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 of a bridgeloan kind, loans that mature and cannot be repaid have to be refinanced and rolled over toprevent default. Given the current circumstances, this is difficult, as Tatas discovered thisMay, when the $3 bn it had borrowed to finance acquisition of JLRwas due for refinancing.After the Tatas acquired the company, business challenges were mostly a result of adversemarket conditions. In the first half of 2008, Jaguars sales volume was 11.2 % more than inthe same period in 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 of2009, Jaguar was 6.9 % ahead of 2008 and Land Rover 45 % down when compared with thesame period last year. There have been a series of non-production days at all three of its UKassembly plants Castle Bromwich and Solihull in the West Midlands and Halewood onMerseyside. Each plant lost an average of 25 days production, which equated to a volumereduction of approximately 25 per cent month on month. A worsening economic situationcould lead to further job losses and even plant closures at Jaguar Land Rover (JLR) inBritain. Tatas bankers are seeking to secure short-term finance of between 500 million and


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1 billion to allow Jaguar Land Rover to pay off supplier payments due by the end of thesummer and stop it running out of cash. The Tatas are trying to persuade the Britishgovernment to stand guarantee for loans that they plan to seek from theUKbanks to bail outJLR. The British government has been reluctant to provide these loan guarantees so far. Ifthe UKgovernments 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 JLRthrough the downturn, the UKgovernment's support iscrucial as JLRwants it to guarantee a pound 340 million European Investment Bank loansanctioned in April. Although JLRhas the option of getting guarantees from private banks, itmay work out to be an expensive proposition. To get the government's help, Tata may havepart with some equity interest in JLR, besides giving board representation. According to arecent report in The Economic Times, the company is negotiating at the moment and if therewas a large financial package from the UKgovernment to the company then there would bea commensurate level of representation on the board.

Despite the challenges, there have been some good news, the companys 14,000-odd workers

agreed to a two-year pay freeze on condition of no compulsory layoffs. This is expected tosave the company up to 68 million a year. The company also bagged a significant orderfrom China for supplying 13,000 cars worth 600 million over the next three years. Morerecently, the UKgovernment approved a grant of 27 million (Rs 192 crore) to JLRforproducing a new eco- friendly car based on Land Rovers LRX Concept. Luxembourg-basedEuropean Investment Bank is also considering giving a loan of 275 million (Rs 2,100 crore)for research to reduce the CO2 emissions from JLRs future products.

What is remarkable is that the Tata group has been able to ride the waves and come ashoresafely this time as well. Tata Motors returned $1.11 bn of its original bridge loan bymobilizing 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 Indiangovernment. Even when the group embarked on its ambitious overseas acquisition strategy,there was evidence 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 bond markets withthe help of government-owned State Bank of India. Tatas are also in talks with defenseestablishment to obtain secure orders for the Land Rover. Finally, the Tatas have usedinnovation to obtain support from the Indian public for its UKoperations. Tatas launchedNano 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 & Tatas will pay interest rate on thesame. This money is also crucial to the Tatas survival strategy.

In sum, despite its grievous errors in the form of the crisis-eve, debt-financed acquisitionJLR, the Tata group has escaped a group-wide crisis by leveraging its brand, the Indiangovernment and the Indian public. That is indeed remarkable, even if fortuitous to somedegree.


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CONCLUSION

With the above study we conclude following few important deeds

which surely helped TATAMotors to inflate their business globally:-

TATAMotors has a high domestic exposure of ~94% in the MHCV segment and ~84% inthe light commercial vehicle (LCV) segment. To expand the product portfolio TATAMotorsintroduced the 25MT GVW TATA Novus fromDaewoos (South Korea) (TDCV) platform.

In 2005, sensing the hugeopportunity in the fully built bus segment, TATAMotors acquired21% stake in Hispano Carrocera SA, Aragonese bus manufacturing company with an optionto acquire 100% holding. TATAMotors has formed a 51:49 joint venture in bus bodybuilding with Marcopolo ofBrazil. This joint venture is to manufacture and assemble fully-built buses and coaches targeted at developing mass rapid transportation systems.

In 2006, Tata Motors signed a joint venture with Thonburi Automotive Assembly Plant Co.(Thonburi), the Thailand-based independent assembler of automobiles to manufacture,assemble and market pickup trucks. The joint venture, in which Tata Motors holds 70% ofthe equity and Thonburi 30%, gets vehicles manufactured in Thonburis manufacturingfacility. The joint venture facilitated Tata Motors address the Thailand market, the secondlargest pickup market in the world after the US.

The TATAs and Italian car giant Fiat kicked off their partnership as 50:50 capacities toproduce in excess of 200,000 cars and 300,000 engines and transmissions yearly, at steady

state .F

iat branded cars are distributed by Tata through the Tata-F

iat dealer network.Formation of a joint venture with aggregate investments of overRs 4000 crore (over euro665 million) in a phased manner to manufacture vehicles for the Indian and overseas market.The JV may be expanded to produce trucks as well.This strategic alliance with Fiat enablesthe two companies jointly to present a wider range of product offerings to the Indian market.It enables Tata Motors to access world-class powertrains from Fiat for its next generation carofferings while enhancing the model line at its dealerships.

In March 2009, Tata Motors had launched the much- hyped 'cheapest' eco-friendly car inIndia. The car has cost overRs 2,000 crore to the company. The car is expected to boost theIndian economy, create entrepreneurial-opportunities across India, as well as expand the

Indian car market by 65%. has shown to the world that India can be a technology leader.

TATAMotors bought the iconic Jaguar and Land Rover operations from Ford for 1.15billion pounds. With the acquisition of Jaguar and Land Rover (JLR), Tata Motors killedseveral birds with one stroke. The acquisition paves the way for the companys entry into theEuropean car market and gives the company a comprehensive range of models ranging fromthe luxuryJaguar to the $2,500 Nano. It provides an entry point into Indias growing luxurycar market which gives new impetus to the companys development program as well and


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provides a captive customer base for the component companies of the Tatas. In the long-runTATA Group and TATAMotors footprint in South-East Asia should help Jaguar/LandRover diversify their geographic dependence from US (30% of volumes) and WesternEurope (55% of volume). Analysts believe that TATAs ownership of JLRwill open doorsfor outsourcing of parts from India, particularly from the current pool of suppliers who

service TATAMotors in India.

Lastly, to outrival in international market and to satisfy & attract the customers expectationsand needs, company needs to focus on these 3 aspects of the high-end market products:

1. Brand Appeal and Endorsement2. PerformanceCharacteristics &3. Quality .

TML can greatly enhance customers perceptions of these three criteria with targetedincreased investments. Brand appeal, performance and quality are all 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 overallfinancial health.The two ways 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 showsus that TML is now targeting brand conscious, high-end consumers. TML needs to have asimilar differentiated strategies focusing separately on these brands.TMLs vision is to be best in the manner in which we operate, best in the products we

deliver and best in our value systems and ethics. TML has come to be known as aninnovator in the passenger car segment not just in manufacturing but along multiple areasalong the value chain.The Tata Indica and Tata Nano are prime examples of the companys innovation capabilitiesand bear testimony to the strength of the companys R&D efforts. This innovation fuelledgrowth coupled with strategic acquisitions is expected to catapult the company to apreeminent position internationally.


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Submitted By:- Deepak Thakur Preeti Sharma Harmeet Kaur Mona Page 23

BIBLIOGRAPHY

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.msn.com www.ndtv.com Kelly School ofBusiness Report on Tata Motors Limited Comprehensive

Strategic Analysis IHS Global Insight Report: India (Automotive)- July09 The Economic Times Business World

tata motors (futuristik group 5 a)

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