The big game hunter
Times of India — March 27, 2008

It's global centrestage for Tata Motors after the buyout of British luxury marquees Jaguar and Land Rover (JLR).

The company joins a premium league of automakers — whose product portfolio spans across commercial vehicles to value-for-money cars to luxury sedans and offroaders. In cars, Tata Motors can now boast of a range from as low as Rs 1 lakh (Nano) and to around Rs 50 lakh.

Next big advantage for Tata Motors is the huge market access. US and UK are among the big markets for these two brands and Tatas get a ready network for not only selling Jaguar and Land Rover but also for own products, though after adding refinement.

Tata Motors can now count itself among a select few global automakers who have a full range portfolio that allows them to cater to a diverse customer range. Companies who have a similar diverse range include Daimler and Toyota. But the big debate going around is whether having a wide range is a matter of strength or a liability.

The jury seems divided on this, considering the fact that many auto giants are today aggressively looking at cutting down their extra flab to have a focussed approach.

Mohit Arora, India director at JD Power Asia-Pacific, feels that apart from giving the Indian company a global footprint, the acquisition is going to pose a new set of challenges.

"It will not be correct to say that the Tatas have arrived in the global automobile industry after buying these marquees. Buying is the first step, but the real challenge lies in turning around these languishing brands," he says.

Industry analysts feel that though Tata Motors gets ready access to a wide range, maintaining this diverse portfolio would be a challenge, in terms of huge investment required to take them forward and constantly innovate.

Pradeep Saxena of auto research firm TNS also feels that going forward, it could be a tough road for Tatas. "It (acquisition) may be a good thing, but it will not be easy to manage," he says.

Integration is one major challenge, considering that the brands operate across geographies, spanning cultures. "This would be a key," says an analyst with a top brokerage who feels that the company would also require a clear brand image on passenger cars.

"Are you manufacturer of cheap cars or do you want to be seen as a luxury brand maker," he adds.

Doubts aside, Tata Motors now has a position of its own globally, straddling across multiple joint ventures.

This is more profound on the commercial vehicle front, where it bought Korea's Daewoo Commercial Vehicle Company in 2004, acquired a stake in Spanish bus maker Hispano Carrocera in 2005, formed a JV with Brazil's bus and coach maker Marcopolo in 2006, the year it also inked a JV with Thailand's Thonburi Automotive Assembly Plant Company for pickup vehicles.

On the passenger car side, the company has a joint venture in India with Italy's Fiat for cars and engines, and the latest acquisition just adds to the increasing global reach. "Eventually managing all these brands and integrating them would be a key challenge," says Pankaj Karna, head of mergers & s at Grant Thornton.

The company may, however, be also looking at creating a limited but growing market for the Jaguar and Land Rover brands in India over the years. "India can be a potentially good long-term market for the brands, say in the next 5-10 years, if the current trend and growth rates continue," Arora says.

Tata Motors would also be looking at using the latest acquisition to get technological know-how for the refinement of its existing products. But Arora warns that buying brands just for technology could not be a wise decision, considering that R&D work could be outsourced or bought from outside.

"If you are buying just for technology, it may not be a good deal. The technology may look advanced today, but you have to upgrade tomorrow," he says.

The company may, however, be also looking at creating a limited but growing market for the Jaguar and Land Rover brands in India over the years.