Tata To Enter Global Auto Market
September 20, 2007
Indian automaker Tata Motors Ltd. intends to enter the global auto market in the near future. To increase its visibility, the automaker is expected to buy Jaguar and Land Rover which both belong to the Ford Motor Corp.’s Premier Automotive Group (PAG).
Experts in the industry said that the potential Indian takeover of European brands Jaguar and Land Rover would be a boost to local pride. The acquisition is a clear-cut sign of India’s economic progress. This is an effort of the Indian automaker to step on Active Brakes Direct to put a halt to global market uncertainty.
But a number of industry analysts and investors question whether a bid by Tata Motors, a manufacturer of workhorse trucks and low-end mass market cars, for the two luxury brands of Ford would make much business sense.
Chairman Ratan Tata confirmed last month that he is clearly interested in entering the competition for the iconic Britain-based auto makers, which have been put on the auction block by the struggling Dearborn-based automaker. Several private equity firms in the United States are also expected to submit bids.
Tata said that such an acquisition would help bring global visibility to his group, a conglomerate that makes everything from automobiles to steel and software, and a name that until recently was esoteric outside the Indian soil.
Tata Steel made a splash in January when it won a bidding war to buy Anglo-Dutch steel maker Corus Group PLC for $12.1 billion, the Detroit News reported. That said deal is deemed to be India's biggest foreign acquisition. It stresses the country's recent outward expansion into the global economy.
But while the Corus acquisition was widely seen as a good match, and appears to be paying off, experts do not see similar synergies in a Tata Motors takeover of Jaguar and Land Rover, the report added.
Jaguar and Land Rover are luxury brands that cater to a small percentage of customers and have a limited distribution network. What Tata needs more, if it wants to reduce its dependence on Indian buyers, is a large overseas sales network that targets the mass market, experts say.
"It makes no sense at all," said S. Ramnath, an auto analyst at SSK Securities Ltd., Mumbai-based brokerage firm. "It's passion that is behind this move." Still, people tracking the matter say Tata Motors has a good chance of bagging the bundled sale of Jaguar and Land Rover brands.
A possible bid from the Indian automaker puts it in competition with American private equity firms, including One Equity Partners LLC and Ripplewood Holdings LLC that each have partnered with former Ford executives.
Long an iconic player in truck and bus manufacturing, Tata has only about ten years of experience selling cars, and most recently, has grabbed headlines with its plan to make an ultracheap car. The automaker has been successful selling into the mushrooming Indian market.
The Indian automaker, headquartered in Mumbai, is developing a car which will be up for sale next year for about $2,500. The car will be considered the most affordable vehicle ever made in real terms.
Tata Motors, formerly known as TATA Engineering and Locomotive Company or TELCO, is India's largest passenger automobile and commercial auto manufacturing company. It is also the world's fifth biggest commercial auto manufacturer.
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