Tatas in auto big league
Economic Times — March 27, 2008

Tata Motor’s $2.3 billion acquisition of UK-based Jaguar Land Rover (JLR) from Ford leapfrogs the Indian automobile major into the big league. It gives Tata Motors a toehold in the many markets in which Jaguar and Land Rover are present.

The big challenge for Tata Motors is maintaining and nurturing the brand value of these icons and turning Jaguar, which has been struggling for many years, around. Strategically the acquisition makes ample sense for the company. Through its tie-up with Fiat, Tata Motors has access to good passenger car technology. And coupled with its ability to keep manufacturing costs low without compromising on design or technology — Nano being the case in point — it has a good chance to build on Indica’s success in the passenger car segment.

The new acquisition completes the portfolio as Land Rover brings top-end SUV technology while Jaguar gives it the upmarket passenger car know-how. In that sense, Tata Motors is now in a position to straddle the entire automobile market — from the cheapest Nano to the luxury end represented by Jaguar. The SUVs and other passenger cars would make up the middle segment.

At some stage, Tata Motors will have to think of producing these brands locally, as well as in the larger Asian market, including China. JLR’s worldwide presence also presents Tata Motors with an opportunity to export their Indian products, Nano for one, which has managed to arouse substantial global interest.

The key issue is Tata Motors’ ability to manage such huge global brands, namely the apprehension that an Indian parentage could erode their brand value. Tatas can claim some success in this respect, particularly in the UK where JLR is based. After initial hiccups, Tata Tea has managed Tetley well, a company twice its size at the time of acquisition.

The successful acquisition and management of steel major Corus, another UK-based company, is also a testimonial to the Tata group’s ability to make M&As work. Tata’s 30% acquisition in US vitamin water brand Glaceau and its subsequent sale to Coca-Cola Co for a good profit shows the group has the ability to cherrypick good brands. Overall, the Tatas have built enough of a reputation to be seen as mature managers of global brands.