Tata Motors

Tata Motors Limited

Type

Public (NYSE: TTM)

Founded 1945

Headquarters Mumbai, India

Key people Ratan Tata, Chairman

Industry

Automotive

Products

Automobiles and Engines

Revenue

INR 369.88 billion (US$ 9.07 billion) (2006)

Parent

Tata Group

Subsidiaries
Tata Daewoo Commercial Vehicle

Website

Tatamotors

Time line and milestones

Tata Motors launches its first truck in collaboration with Mercedes-Benz

1960-1986

Tata Motors is the 2nd largest commercial vehicle maker in India. World over it is the
world's fifth largest medium and heavy commercial vehicle manufacturer. It started its
journey in 1960 with the manufacturing of first commercial vehicle (a copy of a Daimler
Benz model) in Pune. It took five years for the company to begin the commercial
production of heavy commercial Vehicles. Considering the road infrastructure of the
country which does not support heavy vehicles the company adopted a route for light
commercial vehicles (LCV). It came out with its first LCV, Tata 407, in 1986.

1987-1996

Tatamobile introduced in 1989. Post liberalization, in order to expand rapidly, the

company adopted the route to joint ventures. In 1993 it signed with Cummins Engine
Co., Inc., for the manufacture of high horsepower and emission friendly diesel engines. It
was an effort made to reduce the pollution in the existing Tata engines and to produce
more environmentally friendly engines. Furthering the trail of JVs it signed a joint
venture agreement with Tata Holset Ltd., UK, for manufacturing turbochargers to be used
on Cummins engines.
1997-2006

In 2000, it launched compressed natural gas (CNG) buses and also 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. Post 2000, the company introduced a
variety of new models. It introduced the Ex- series vehicles with high tonnage capacity
and high pick up and also came out with the entirely new LCV (207 DI) with direct
ignition technology to cater to the customers' requiring one and same vehicle for
commercial as well as personal use.

Daewoo acquisition

Tata Novus

In 2004, it acquired the Daewoo Commercial Vehicle Company of South Korea. The
reasons behind the acquisition were:

Company’s global plans to reduce domestic exposure The domestic commercial vehicle
market is highly cyclical in nature and prone to fluctuations in the domestic economy.
Tata Motors has a high domestic exposure of ~94% in the MHCV segment and ~84% in
the light commercial vehicle (LCV) segment. Since the domestic commercial vehicle
sales of the company are at the mercy of the structural economic factors, it is increasingly
looking at the international markets. The company plans to diversify into various markets
across the world in both MHCV as well as LCV segments.

To expand the product portfolio Tata Motors recently introduced the 25MT GVW Tata
Novus from Daewoo’s (South Korea) (TDCV) platform. Tata plans to leverage on the
strong presence of TDCV in the heavy-tonnage range and introduce products in India at
an appropriate time. This was mainly to cater to the international market and also to cater
to the domestic market where a major improvement in the Road infrastructure was done
through the National Highway Development Project

On its journey to make an international foot print, it continued its expansion through the
introduction of new products into the market range of buses (Starbus & Globus).

Joint ventures

In 2005, sensing the huge opportunity in the fully built bus segment, Tata Motors
acquired 21% stake in Hispano Carrocera SA [2], Spanish bus manufacturing company
and introduced its high-end inter-city buses in the country.

Tata Motors has also formed a 51:49 joint venture with Marcopolo S.A., a Brazil-based
global leader in bus body building. This joint venture is to manufacture and assemble
fully-built buses and coaches targeted at developing mass rapid transportation systems.
The joint venture 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.

A venture with British carmaker MG Rover saw the launch of the CityRover in 2003.
This car was based on the Tata Indica and built alongside it in India, but sales were not
strong and production finished in April 2005 when MG Rover went bankrupt. MG Rover
was purchased by Nanjing Automobile of China three months later, but when car
production resumed in 2007, the CityRover was not part of the production plans.

Tata Ace

Main article: Tata Ace

The latest hit of Tata Motors is its mini truck Ace. Ace, India's first indigenously
developed sub-one ton mini-truck, was launched in May 2005. It was an instant hit.
Analysts opined that Ace had changed the dynamics of the light commercial vehicle
(LCV) market in India by creating a new market segment termed the SCV segment. Ace
rapidly emerged as the first choice for transporters and single truck owners for city and
rural transport. By October 2005, since the launch of Ace, LCV sales of Tata Motors had
grown by 36.6 percent to 28,537 units due to the rising demand for Ace. The Ace was
built with a load body produced by Autoline Industries. [3] By 2005, Autoline was
producing 300 load bodies per day for Tata Motors. Autoline
In 2005, Tata Motors became the only major engine manufacturer in the world (aside
from a Briggs & Stratton emissions test) to express any formal interest in the turbulence-
boosting cylinder head grooves invented by Somender Singh (Mysore).

2007

Tata Indigo

Tata Motors, through its joint venture with Fiat, gained access to Fiat’s diesel engine
technology and is likely to gain access to the latter’s strong overseas distribution network
for its passenger cars. Tata Motors is looking to extend this relationship to other segments
like pick-ups and MHCVs. The company also plans to expand its global footprint with
the launch of ‘Global Truck’ and ‘Global Pick-up’ in domestic and international markets
by 2007-08. Tata Motors plans to launch the new pick-up in India, Southeast Asia,
Europe, South Africa, Turkey and Saudi Arabia. The launch of the global truck will mark
the entry of the company into developed markets like Europe and the United States. The
project was initially a collaboration between Tata Motors and its subsidiary Tata Daewoo
Commercial Vehicles, but later Tata Motors decided to work with Iveco as Daewoo’s
design was not in sync with the needs of sophisticated European customers. The company
has formed a joint venture with Thailand’s Thonburi,( Exhibit-1) an independent auto
assembler, in which Tata Motors will hold a 70% stake. The joint venture will set up a
plant with capacity to manufacture pick-ups a year and will sell them in Thailand, the
second largest pick-up market in the world, and in other regional markets. The joint
venture product is likely to be a part of Tata Motors’ ‘Global pick-up’ plans.

2008 onwards

On January 3rd, 2008, The Hindu Business Line [4] reported that Ford Motor Company
(US) named Tata Motors the "preferred bidder for Ford's British marquees Jaguar and
Land Rover ... but a final decision for the sale was yet to be taken".

A compressed air car is going to be produced by Tata Motors in 2008.[5]

Auto policy of Government of India (GOI) envisions to establish a globally competitive
automotive industry in India and to double its contribution to the economy by 2010. GOI
policy has rightly recognized the need for modernizing of vehicles to arrest degradation
of air quality. The terminal life policy for commercial vehicles and move toward
international taxing policies linked to age of vehicles, are steps in the right direction
which will lead to increased sales for Tata motors Commercial vehicle division.

Effect of Government Policy on Tata Motors CV Division Commercial Vehicles segment

sector has been at the forefront of the strong showing by the automotive industry over the
past few years. Following factors have led to growth in sales:

The cut in excise duty that enabled manufacturers like Tata Motors to reduce prices

The attractive financing offers and freebies enabled by low interest rate policies by
Government the need to transport higher volumes of agricultural and industrial goods
Low interest rates

Tata Xover

New auto policy considered by Government of India last announced an automobile policy
in December 1997. The policy required majority-owned subsidiaries of foreign car firms
to invest at least $50 million in equity if they wished to set up manufacturing projects in
India. It also forced them to take on export obligations to fund their auto part imports and
required them to submit to a schedule for increasing the share of locally made parts in
their cars. Mere car assembling operations were not welcomed.

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.
Investments in making auto parts by a foreign vehicle maker will also be considered a
part of the minimum foreign investment made by it in an auto-making subsidiary in India.
The move is aimed at helping India emerge as a hub for global manufacturing and
sourcing for auto parts. The policy sets an export target of $1 billion by 2005 and $2.7
billion by 2010. The policies adopted by Government will increase competition in
domestic market, motivate many foreign commercial vehicle manufactures to set up
shops in India, whom will make India as a production hub and export to nearest market.
Thus Tata Motors CV will have to face tough competition in near future, which might
affect its growth negatively.

Chrysler collaborates with Tata: Tata's all-electric Ace mini truck will be sold through
Chrysler's Global Electric Motorcars division.

Tata Nano

Main article: Tata Nano

Tata has developed a car, named Tata Nano, that aims to sell in 2008. It is the least
expensive production car in the world: the price is about Rs 100 000 (USD $2,500). The
company unveiled the supermini car during the Auto Expo 2008 exhibition in Pragati
Maidan, New Delhi. Tata Nano is considered to be the cheapest production car in the
world. Bajaj Auto and Mahindra-Renault have plans to launch cars in this price range.

Tata has faced controversy over developing the Nano. Some environmentalists are
concerned that the launch of such a low-price car could lead to mass motorization in
India with adverse effects on pollution and global warming. And there was strong
opposition to the compulsory acquisition of land for the proposed car factory in Singur.

Global competition

Tata Motors have some distinct advantages in comparison to other MNC competitors.
There is definite cost advantage as labor cost is 8-9 percent of sales as against 30-35
percent of sales in developed economies. Tata motors have extensive backward and
forward linkages and it is strongly interwoven with machine tools and metals sectors.
India is an excellent source for IT based engineering solution for products & process
Integration. There are strong supporting industries i.e. auto component industry has world
class capabilities. 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.
Global presence

Main article: Tata Daewoo Commercial Vehicle

Tata Motors, which has major presence India as seen at a roadside truck stop in Ladakh,
is looking to expand its business globally.

In 2004, Tata Motors bought Daewoo's truck manufacturing unit, now known as Tata
Daewoo Commercial Vehicle, in South Korea. In March 2005, it acquired a 21% stake in
Hispano Carrocera SA, giving it controlling rights in the company.

On January 3, 2008 Ford Motor Co. picked India's Tata Motors Ltd. as the top bidder for
its Jaguar Cars and Land Rover units and has now entered more "focused negotiations at
a more detailed level" with Tata.[10]

Present global challenge

Volvo, a manufacturer of trucks, buses, cars, construction equipment, and aero engines,
has entered in India in 1998. Its main focus is 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 competitive advantage is its high technology
which makes the vehicle a very comfortable option to travel through. Its trucks are
reputed for their performance and economy and are the flag bearers in their production
activities in India. It is still operating in the niche market of high end buses where the
Tata compete through its Spanish buses.

Future challenges

Plastic Car Production- Tata plans on producing a car that is made of nearly 100% plastic.

Mahindra and Mahindra: JV with ITEC, North American leader in heavy trucks. M&M
has formed a 51:49 JV called Mahindra International with ITEC, USA, (parent
NAVISTAR), to manufacture commercial vehicles and to bolster its position in the CV
business. 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. Mahindra
International aims to have a presence across the CV market (6-35 tonnes GVW) with
variants of passenger transport, cargo and specialised load applications and is likely to
start producing medium/heavy commercial vehicles from FY09.

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,
such as long-haul trucks, tippers, tractor trailers and multi-axle vehicles in the 16-32
tonne range at its Pithampur plant, with an initial capacity of 24,000 units per annum and
at an investment of Rs7bn. The JV plans to sell nearly half of its production in the
domestic market, while the rest is to be exported to the Middle East, Turkey, Russia, Asia
and Africa. 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 for US$35m. Avia
manufactures 6-9 tonne LCVs and has a capacity of 20,000 units per annum. The
acquisition has given ALL direct access to an entire range of Avia trucks, Avia’s press
shop with dies and tools, welding lines, state-of-the-art paint shop and R&D facilities.
ALL has also entered into technology agreements with Hino Motors of Japan and ZF of
Germany to complement its in-house R&D efforts and developing complementary
components and aggregates.

Products

Passenger cars and utility vehicles

Tata Indica

Tata Sierra

Tata Estate

Tata Sumo/Spacio
Tata Safari

Tata Indica

Tata Indigo

Tata Indigo Marina

Tata Nano (September 2008)

Tata Xenon XT

Concept vehicles

2000 Aria Roadster

2001 Aria Coupe

2002 Tata Indica

2004 Tata Indigo Advent

2005 Tata Xover

2006 Tata Cliffrider

2007 Tata Elegante

Commercial vehicles

Tata 909 high deck covered rear load area truck

Tata 1109 low deck open load area truck

Tata 1613 low body open load area truck

Tata Ace

Tata TL/Telcoline/207 DI Pickup Truck

Tata 407 Ex and Ex2

Tata 709 Ex

Tata 809 Ex and Ex2

Tata 909 Ex and Ex2

Tata 1109 (Intermediate truck)

Tata 1510/1512 (Medium bus)

Tata 1610/1616 (Heavy bus)

Tata 1613/1615 (Medium truck)

Tata 2515/2516 (Medium truck)

Tata 3015 (Heavy truck)

Tata 3516 (Heavy truck)

Tata Novus (Heavy truck designed by Tata Daewoo)

Military vehicles

Tata 407 Troop Carrier, available in hard top, soft top, 4x4, and 4x2 versions

Tata LPTA 713 TC (4x4)

Tata LPT 709 E

Tata SD 1015 TC (4x4)

Tata LPTA 1615 TC (4x4)

Tata LPTA 1621 TC (6x6)

Tata LPTA 1615 TC (4x2)

Alternative propulsion

Tata Motors aims at producing around 6,000 One CAT air cars at €2,500 by 2008.

Tata Motors subsidiaries

Telco Construction Equipment is a joint venture between Tata Motors and Hitachi, which
focuses on excavators and other construction equipment.

HV Transmission (HVTL) and HV Axles (HVAL): HVAL and HVTL are 100%
subsidiary companies of Tata Motors engaged in the business of manufacture of gear
boxes and axles for heavy and medium commercial vehicles, with production facilities
and infrastructure based at Jamshedpur. The combined revenue of the two companies rose
38.7% yoy for 9MFY07 while the combined PAT rose 50.9%. Tata Motors plans a capex
of Rs2bn each for HVAL & HVTL and plans to raise funds for the same, most probably
by way of a strategic sale to a technical collaborator. The strategic sale of either HVAL or
HVTL or both is likely to be completed in the next one or two quarters.

Tata Technologies Limited (TTL): TTL provides Engineering and Design (E&D)
solutions to the Automotive Industry. Tata Motors holds 86.91% of TTL’s share capital.
TTL is based in Pune (Hinjawadi) and operates in the US and Europe through its wholly
owned subsidiaries in Detroit and London respectively. It also has a presence in Thailand.
Tata Technologies is a software service provider in the IT services and BPO space. Its
global client list includes Ford, General Motors, Toyota and Honda, to name a few. It
bought over the British engineering and design services company, Incat International Plc
for Rs4b in August 2005. Incat specializes in engineering & design services and product
lifecycle management in the international automotive, aerospace and engineering
markets. With this acquisition, Tata Motors will have closer proximity to its global
customers and be able to provide a wider range of services.

Tata Daewoo CV Ltd(TDCV): TDCV is a 100% subsidiary of the Tata Motors based in
South Korea, which was acquired in March 2004. TDCV is in the business of
manufacture and sale of heavy commercial vehicles.Tata Daewoo is Tata Motors’ 100%
subsidiary in Korea, with a market share of 30%.Tata Motors will use the Daewoo
technology to introduce higher tonnage trucks in the Indian market and use Tata Daewoo
for exports globally. In line with this strategy, it has already introduced the Novus, a high-
end tipper developed by Tata Daewoo for the Indian market.