Tata Motors Limited, formerly known as TELCO (TATA Engineering and Locomotive Company), was formed in 1954. It is the only fully integrated automobile manufacturer that now stands as India's largest and the world’s 5th largest passenger automobile and commercial vehicle manufacturing company with a product range designed to meet national and international transportation needs.
Tata Motors has a wide portfolio ranging from a Tata Mercedez Benz truck to diversifying into passenger cars like Tata Sierra,Tata Estate,Tata Indigo and Indica, concept vehicles like Aria Roadster and Tata Elegante, commercial vehicles like Tata heavy trucks and military vehicles. Tata Motors was first listed on the NYSE in 2004. It created wealth of Rs. 320bn during 2001-2006 and stood among top 10 wealth creators in India. It has its manufacturing bases in Jamshedpur, Lucknow and Pune. Tata Motors has recently had a couple of important mergers and acquisitions like with Daewoo in South Korea, Hispanso and a JV with Fiat.
Tata Motors is a company of the Tata and Sons Group, founded by Jamshetji Tata and is currently headed by Ratan Tata who is the chairman. The company has the workforce of 22000 employees working in its three plants and other regional and zonal offices across the country. This report analyses the current market position of Tata Motors and gives details regarding the company’s plans and strategies for growth in the future. [pic]STRENGTHS Post liberalization, in order to expand rapidly, the company adopted the route to joint ventures (JV):
• 21% stake in Hispano Carrocera, a Spanish bus manufacturing company and introducing its high-end inter-city buses in the country. • A 70% JV with Thailand’s Thonburi (auto assembler) which will set up a plant to manufacture pick-ups and will sell them in Thailand. • The 25MT GVW Tata Novus launched from Daewoo’s platform (TDCV). • 51:49 JV with Brazilian based Marcopolo (bus building). This JV is to manufacture and assemble fully-built buses and coaches targeted at developing mass rapid transportation systems.
• In 1993, it started manufacture of high horsepower and emission friendly diesel engines in an effort to reduce the pollution in the existing Tata engines and to produce more environmentally friendly engines. • In 2000, it launched CNG buses and filled the product line gap through the introduction of the 1109 vehicle which is an intermediate commercial vehicle and is useful for medium tonnage loads. • Its Ex- series vehicles have high tonnage capacity and high pick up and the LCV (207 DI) with direct ignition technology caters to the customers' requiring one and same vehicle for commercial as well as personal use.
• Tata Motors has a high domestic exposure of ~94% in the MHCV segment and ~84% in the LCV segment. • The latest hit of Tata Motors is its mini truck Ace which is India's first indigenously developed sub-one ton mini-truck. Ace has rapidly emerged as the first choice for transporters and single truck owners for city and rural transport. • The only major engine manufacturer in the world to express any formal interest in the turbulence-boosting cylinder head grooves • There is definite cost advantage as labor cost is 8-9 per cent of sales as against 30-35 per cent of sales in developed economies.
• Tata motors have extensive backward and forward linkages and it is strongly interwoven with machine tools and metals sectors. Also, India is an excellent source for IT based engineering solution for products & process Integration. [pic] WEAKNESSES • Tata Motors' range of passenger cars is still not comprehensive by industry standards. It has a limited product portfolio which has given its key competitors (Hyundai motors, Maruti Suzuki) an extra edge.
• Even after being in the passenger cars market for quite some time, somewhere in the minds of consumers Tata motors is still synonymous with heavy and commercial vehicle makers and not passenger car makers. Also because of this consumers may think the passenger cars can lack aesthetics and are more built for robustness. • According to auto experts, low cost is a stronger motive at Tata Motors that sometimes makes quality take a backseat. • The company is overstaffed and hence human resource utilization is sub optimal. • Also decision making gets a hard hit due to extensive hierarchy prevalent at Tata Motors.
• They do not have a presence in high volume markets like Europe and America. • Not very high car sales volume which hampers their future plans like increasing their production and expansion. [pic] OPPORTUNITIES • Tata plans to leverage on the strong presence of TDCV in the heavy-tonnage range and introduce products in India at an appropriate time. • The JV with Marcopolo will be beneficial to both companies since the latter will absorb technology and expertise in chassis and aggregates from Tata Motors, and Marcopolo will provide know-how in processes and systems for bodybuilding and bus body design.
• JV with Fiat, it is likely to gain access to Fiat’s diesel technology and to the latter’s strong overseas distribution network for its passenger cars. • Tata Motors may extend this relationship to other segments like pick-ups and MHCVs. • Launch of the global truck will mark the entry of the company into developed markets like Europe and the USA. Working with Iveco means that the designs will be in sync with the needs of sophisticated European customers. • GOI policy
for modernizing of vehicles to arrest degradation of air quality and move toward international taxing policies linked to age of vehicles, are steps which will lead to increased sales for TATA motors Commercial vehicle division. • The cut in excise duty that enabled manufacturers like TATA Motors to reduce prices • The need to transport higher volumes of agricultural and industrial goods. • The cut in tariff on petroleum and diesel from 8 per cent to 6 per cent will make commercial vehicles more competitive in the export market. • Development of the national highway development program will increase TATA sales in the long run.
• Tata is developing a car it aims to sell in 2008 for about $2,500 USD, which would be considered the cheapest vehicle ever made in real terms. • There is huge demand in domestic markets due to infrastructure developments and Tata Motors is able to leverage its knowledge of Indian market. There are favorable Government polices and regulations to boost the auto industry i. e. Incentive for R&D. [pic] THREATS WITHIN THE INDUSTRY There are a lot of new competitions coming up in the commercial vehicles segment which threaten the huge market share which Tata Motors has garnered.
Some of the new Joint Ventures and competitions have been listed below: • M&M has formed a 51:49 JV called Mahindra International with ITEC, USA, (parent NAVISTAR), to manufacture commercial vehicles. ITEC is the leader in medium and heavy trucks and buses in North America, and is the world's largest manufacturer of medium-duty diesel engines. • Force Motors: JV with MAN for manufacturing high-tonnage vehicles Force Motors has paired up with MAN in a 70:30 JV to manufacture high-tonnage and specialty vehicles.
Further, the two companies have formed another JV to manufacture buses in India from end-2007. • Ashok Leyland: Acquisition of Czech Republic-based Avia Ashok Leyland (ALL) recently acquired the truck unit of Czech Republic-based Avia. • Volvo, a leading manufacturer of trucks, buses, cars, construction equipment, and aero engines has a main focus in the area of fully built buses. In India, it has focused on providing economical transport solutions in consonance with its values of safety, quality, and environmental care.
Its trucks are reputed for their performance and economy and are the flag bearers in their production activities in India. THREATS OUTSIDE THE INDUSTRY • Farmers are agitating against the land acquired by the firm in Singur for its ambitious Rs 1, 00,000 car project. The protest is being lead by Mamta Banerjee of the Trinamool Congress. Farmers are protesting that the land is fertile land and the government acquired the land without their consent. Presently this matter is lying in the court of law and is still a contentious issue.
• An Indian cabinet panel will soon consider a new automobile policy that aims to set fresh investment guidelines for foreign firms wishing to manufacture vehicles in the country. The policies adopted by Government will increase competition in domestic market, motivate many foreign CV manufactures to set up shops in India. [pic] • Increased interest rates have a potential to hit the sales. Auto loans have become costly causing customers to defer their purchase which has impacted the sales of Tata Motors. • The strengthening of the rupee against the dollar has made their cars less attractive in the foreign market.