A brand new car world
The Economic Times— March 27, 2008

The deed is done, the big cat and the strong heart from blighty are now Indian-owned entities and the automotive world will never be the same again. In one stroke, Ratan Tata has propelled his company and the Indian automotive industry into prominence. However, to say this was achieved only with the acquisition of Jaguar-Land Rover will not be entirely right.

For this year, Tata Motors also hit the right notes with its innovative thoughts in devising probably the most radically effective peoples’ car and showing the automotive top dogs a thing or two in design, manufacture and back-end management.

In fact today, with the acquisition of JLR, Tata Motors has probably the most divergent automobile range in its portfolio. However, one has to understand that the buying of JLR might have been an easy thing despite the protracted negotiations. But the real challenge starts now.

Going against the analytical minds in the world of money, I think that Tata Motors would do well to let JLR retain its brand identity, values and core character three traits that would need to be understood and then invested in so that JLR could prosper. This investment bit was one key aspect which Ford, given its financial mess in North America, did not get right with Jaguar.

In fact, Tata Motors could also learn from the way Ford went about doing the business in devising the X-Type. Jaguar needed a compact executive saloon to do the business against the BMW 3-series and the Mercedes-Benz C-class and rather than do it with typical Jaguar design and engineering DNA, Ford thought it would adopt the Yankee approach by clothing a Mondeo in pseudo retro-Jag manner and peddle it to aficionados of the Big Cat. It was a big mistake and one, which never gave Jaguar the fillip to fulfil its potential among the Premier Automotive Group (PAG).

There will be talk about integrating JLR into Tata Motors, but I think integrating with would be the better term. However, the challenge here is to keep the ownership Indian of what essentially are top-notch European brands. And in this regard, Ratan Tata has already been pretty clear on how his company would handle this critical aspect: “We plan to retain the image, touch and feel of these brands and won’t tinker with them in any way.”

On paper, this seems a good enough approach and what JLR needs is for someone to get the monkey off its back and this change of ownership is just that. There are good people within Jaguar and the firm has strong technological resources and capabilities with which to go about its business.

And nothing works in this business better than a constant churn of new model excitement, a detail that Jaguar more than Land Rover could certainly do with. The dithering within the Ford management (certainly more bureaucratic than Tata Motors) on Jaguar’s need for a complete new model range - the F-Type - has crippled the company while rivals like Mercedes-Benz and BMW, to name but two, have developed a whole range of exciting models spawned from just one or two building blocks.

Take the case of the E-class, which has saloon and estate models with rear wheel and all wheel drive capability, plus also the E-class platform is used to stunning effect into devising niche models like the super selling CLS coupe saloon. Jaguar can do just that but it needs the will and the wherewithal.

In fact, much of the preparatory work for the new range is already there and the model portfolio till 2011 is well on its way. Tata Motors will need to back up the Jag boffins to devise a genuine made-in-Coventry automobile, which would be just the best way to announce Jaguar was in safe hands and also to dispel any notions about brand character being thrown to the hounds in the US and Germany, two key markets for Jaguar.

Land Rover is in fairly robust health and here Tata Motors should have a better ride, but it will need to keep Land Rover and Tata Safari separate because the over-riding temptation of packing in all SUVs in the group together is not what would work in the interest of both the group and its new acquisitions.

Certain integration in terms of corporate ownership could help meet newer emission levels. A growing concern for all the world’s premium automotive brands is the onset of stringent CO2 emissions in the EU. On their own, the large Land Rover SUVs, plus the eclectic Jaguar performance saloons would be ruined but when factored in with the products of Tata Motors, the overall corporate average on the CO2 front would be reduced mightily.

A case in point is that of Aston Martin, formerly part of PAG, which Ford sold off to a Middle Eastern consortium. In fact, in a canny move, the Kuwaiti owners have allowed Ford to maintain a very small equity stake in Aston Martin, which should enable the Gaydon-based sports car maker to benefit in the CO2 corporate average for being part of the Ford portfolio.

Alliances in the automotive industry on technology sharing, cutting down on lead development times and also cost are fairly common and here for the first time, one can see that Tata Motors could indeed have technology - rear wheel drive for swanky performance saloons and rugged all-wheel drive for SUVs, which it could swap with others, notably technology alliance partner Fiat and also others.

It is in the realm of possibility and would be harnessed given the cost benefits. The Tata-JLR deal envisages no moving of manufacturing facilities out of the UK or of disrupting the existing product plan till 2011. While this might seem a deterrent, I think with deft handling, Tata Motors could do much more of the backend development in India for future niche models while retaining front-end work (design, brand management, marketing, etc) in the UK.

This deal provides Tata Motors with the necessary disruptive business case advantage over its rivals if handled properly. Given that aggregate engineering development costs in India are 10% of those in Europe, it would be just the ticket for niche models to proliferate in the Jaguar and Land Rover portfolios like at no other time in their history.

And here, Tata Motors has to understand the niche game very well to rake in the big bucks. “Premium cars sold on emotion, not price, represent the future for the developed world’s car industry,” said Dr Wolfgang Reitzle, the architect of Ford’s PAG and also the man responsible for the new Mini from BMW, the new Range Rover and the Rolls-Royce Phantom.

Maybe, this could be the mantra for Tata Motors making a success with its two stunning acquisitions. And if anyone understands this best within Tata Motors, it is Mr Tata. The most stringent challenge would be for the big man’s mindset to filter down, both for JLR and Tata Motors’ future glory.