Driving into the global arena
The Financial Express — December 31, 2004

The year 2004 will go down as one in which Tata Motors created history. On September 27, Tata Motors became the first Indian automobile company to be listed in the New York Stock Exchange. It is also the second Tata group company after Videsh Sanchar Nigam Ltd (VSNL) to be listed in the New York bourse. The New York listing rides on the back of strong performance in the year 2003-04.

Overall sales volumes at 314,259 vehicles and turnover at Rs 15,552.42 crore during 2003-04 were both around 43% higher than in 2002-03 and the company retained its position as the largest Indian automotive company in terms of revenues. In terms of number of vehicles on the roads too, Tata Motors has a dominant presence with three million units.

Tata Motors' strong performance must be seen in the context of the soft interest rate regime that has spurred the purchase of cars. It is also a clear sign that the once-staid company has got its act together. In the last few years, the company has evolved from a largely heavy and commercial vehicle manufacturer into India's second largest car manufacturer after Maruti Udyog Ltd.

Tata Motors executive director (commercial vehicle business unit) Ravi Kant said, "The low interest costs have brought down the cost of ownership, thereby spurring people to buy with greater confidence." The listing was also yet another sign that the company was going truly global. In March 2004, Tata Motors acquired Daewoo Commercial Vehicle Co Ltd of South Korea (now named Tata Daewoo Commercial Vehicle Co Ltd (TDCV).

The Daewoo deal is a part of the strategy of delinking risks from the domestic market by going abroad. Company executives make it clear that the Daewoo acquisition is not an on/off exercise and they continue to evaluate such options even now. The company has recently said that its tie-up with MG Rover of the UK to sell Indica car under the City Rover brand name continues. There had been speculation that the tie-up had run into rough weather.

The recent joint statement has put an end to that. The deal between the two sides entailed the export of about 1,00,000 Indica cars over a five-year period from November 2003 which would be sold in the US under the Rover brand name. What's in store for the future? The company has chalked out an ambitious expansion plan of Rs 5,180 crore. This comes on the back of an investment of Rs 780 crore in the last three years.

The expansion of the car plant is under way to increase the manufacturing capacity from 1,50,000 per year to 2,25,000 per year. This capacity expansion is expected to be achieved by the end of the current fiscal. "We have seen that different segments in the industry have different cyclicality. For example, medium and heavy commercial vehicles have deeper cyclicality vis-a-vis light commercial vehicles (LCVs).

We have also seen that cyclicality in commercial vehicles (CV) industry has different phase in different markets. Therefore, we are strengthening our presence in the LCV and pick-up market to get greater volumes and are also expanding our presence in international markets," added Mr Ravi Kant. The company has been a major player in the Indian automobile revolution. The next big thing for the company may well be the launch of its Rs 1 lakh car. This is Ratan Tata's dream project.

The small car project may well hold the key not only to the company's fortunes, but also has the potential to change the scenario for the automobile industry in India.