Wednesday, August 29, 2007

Globalization: India's Tata Motors May Buy Jaguar

India's Tata Motors (NYSE:TTM) apparently wants to cover both ends of the vehicle market, and might soon be selling both the world's least expensive and the world's most expensive cars.

In India, Tata Motors will introduce a new 4-door "1-lakh car" early next year, which is half the price of the lowest-priced cars on India's roads today and will be the cheapest car in the world. "1-lakh" rupees is 100,000 rupees, which is about $2,400 at the current exchange rate of 41 rupees per USD.

Washington Post: The cheapest car in the world is being released during a time of good fortune for many Indians. While two-thirds of the country's population still struggles on $1 a day, millions of people here have emerged from grinding poverty into the lower middle class. The Asian subcontinent's largely service-based economy has been growing 8 to 9 percent a year, and World Bank studies estimate that India's middle class will expand from 50 million people today to more than 500 million by 2025.

Typical buyers of the 1-lakh car would include the millions of Indians who currently have a motorcycle or moped as the "family vehicle" (see the picture above; look closely and you'll see two adults and 4 children on one motorcycle!).

On the other end of the vehicle market, Tata wants to buy Ford's luxury brands Jaguar (pictured above is the new 2009 Jaguar XF, availabe in June 2008) and Land Rover.

Wall Street Journal: The acquisition, which could cost more than $1 billion, also would fit the Tata Group's plans to become one of India's first global brands and diversify its businesses overseas.

It is unlikely that Tata Motors will be able to sell many Jaguars or Land Rovers in India, but it could use the companies' technology and production facilities to improve its own cars and trucks. Tata Motors also would seek to use Jaguar's and Land Rover's international distribution networks to promote its own cars abroad.

The steel-to-software Tata Group is one of India's largest and most respected conglomerates. Its 96 companies employ about 200,000 people and have annual sales of more than $20 billion. The group has been leading a wave of Indian overseas investment as local companies have used the wealth generated in India's strong domestic economy to make acquisitions around the world.

Bottom Line: As India grows and prospers, and as its middle class increases by 5 times over the next several decades, India's consumers and companies will increasingly shop and invest globally, to the benefit of many U.S. companies.


At 8/29/2007 9:53 PM, Blogger Sachin Mahesh said...

As quoted in Wall Street Journal, I also think that one of the main areas Tata Motors would benefit from the acquisition would be from the technology and R&D that Jaguar is rich in. Tata Motors has been making trucks and pick ups from several decades. But when they started making cars in 1998, their technology and the quality was far behind the competitors. They made huge recalls and have made vast improvements over a period of time. Tata Motors' merger with Daewoo, Hispano Carrocera have all been made with an intention to get access to better technology and I think the one with the Jaguar seems to be along the same lines. But I wonder how they will be able to incorporate that kind of superior technology and make cars as cheap as $2400. It will be interesting to see if they will come up with their own luxury segment car if the acquistion works in their favor...


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