Tatas' Triumph
Times of India — March 28, 2008

Tata Motors' acquisition of the Jaguar and Land Rover brands for $2.3 billion proclaims the arrival of a truly global Indian automotive player. Tata Motors is now the only company in the world that has the distinction of having a portfolio of vehicles from the entry-level low-cost car, Nano, to the highest echelon represented by the Jaguar brand. Its own sedans and SUVs and those of Land Rover will now constitute the mid-segment.

Among the major challenges that Tata Motors faces is sustaining and perpetuating the brand value of these luxury symbols while at the same time cutting costs. The acquisition does not perhaps come at a particularly good time. With a global economic slowdown in sight, the market for luxury cars is likely to shrink in the short term.

There are also other issues. British and European labour unions are difficult to deal with. Shifting production to low-cost locations will be tough. Moreover, with fuel efficiency of vehicles and their emission levels increasingly dictating the choice of consumers, Tata Motors will have to seriously work on improving the cars. Both brands are seen as big fuel guzzlers.

Nevertheless, the confidence shown by Tata Motors in taking on the two brands, which have not been performing well, is commendable. It reflects the coming of age of Indian companies. The acquisition gives Tata Motors a foothold in advanced markets where it has not yet been able to make any significant mark. Its association with Fiat and now with Ford ensures that Tata has access to superior technology.

It could strategically leverage this to improve its other cars and introduce them in developed automotive markets. There is no doubt that this deal will help Tata Motors leapfrog into the highest ranks of global automobile manufacturers. It will transform its image from an insignificant manufacturer of cheap and small cars to a big player, in the same way the Japanese and Korean auto majors have evolved.

The deal also holds great significance for India. It is probable that in order to improve profitability and cut costs Tata Motors at some point will have to move production to low-cost locations like India. The company already has the option to source components from India. Tata Motors' strategy reflects how growing prosperity brings about higher aspirations.

Surely, Tata Motors is well aware that many of those hoping to drive the Nano today will at some time aspire to cruise in a bigger and more expensive car. We can look forward to Jaguar and Land Rover cars becoming more common on Indian roads.