With the Rs. 465 crore acquisition of Daewoo Commercial Vehicle Co (DWCV), the global ambitions of Tata Motors have finally taken wing. The company had been eyeing the Southeast-Asian market for a while, but had made little progress so far. That has changed overnight. In one shot, the company has appropriated a big role in the Korean market and a toehold in China – DWCV has over 25% of the Korean heavy trucks’ market, and a presence in china as well. Strategically too, the acquisition is a perfect fit. DWCV makes trucks in the 200-400 horse power (HP) segment as against the sub-200 HP ones made by Tata Motors. In that sense, Daewoo’s product portfolio complements Tata Motors. Through this Korean acquisition, Tata Motors can now sell its lower HP range trucks in the Southeast-Asian market. And it can bring Daewoo’s higher HP trucks to the local market to take on the likes of Volvo in the over 200HP segment. The synergies do not end here. DWCV does very little of aggregate manufacturing, which means that Tata Motors can outsource to the Daewoo plant. 

Most importantly, unlike the bankrupt parent Daewoo Motor, DWCV is a profit making company. Therefore, it is not as if the Tatas are taking over a sick company and are trying to revive it. The only issue one can perhaps find fault with in the deal is its timing. The global economy is recovering and the automobile cycle is on the upswing. An acquisition like this may have cost considerably less a couple of years ago. But then, funding is hardly an issue. Tata Motors has a comfortable debt situation and an investible surplus of over Rs.1,200 crore. Therefore, the deal is unlikely to make huge demands on the company’s balance sheet. The actual challenge for the Tatas lies in successfully integrating the acquired company within its fold. Considering that this is a first for Tatas, it is no mean challenge. Culturally too, Korea is very different from India. However, if the Tatas were to resolve the integration issues successfully, it would give Tata Motors just the boost it needs in its quest to become an Indian auto MNC. And bring in one more ratan to its fold.