Sample donated: Lois Osborne
Last updated: September 17, 2019
Question 11.1 Background of TataMotors Group Figure1: Logo of Tata Motors (Glass, Lewis & Co, 2016)Foundedin 1945, the Tata Motors is India’s largest automobile company and was formerlyknown as TELCO (Tata Engineering and Locomotive Company). It has grown rapidlysince it was founded by Jamsetji Tata in 1868 (Tata Motors, 2018). The Tata Motors are more focus on producingand selling the commercial vehicles, passenger vehicles, midsize car and alsoutility vehicle segments to the customers. TheTata Motors vision is “As a High-Performance Organisation, we are, by FY 2019,among the top 3 in a Global CV and Domestic PV, achieving sustainable financialperformance and delivering exciting innovations” and the mission is “Weinnovate, with passion, mobility solutions to enhance quality of life”.
Moreover, the values of Tata Motors are integrity, teamwork, accountability,customer focus, excellence and speed (Tata Motors, 2016).Inaddition, the Tata Motors also offered its commercial vehicles and passengervehicles in others countries such as in Europe, Asia Pacific, Latin America,Africa, the Middle East, Australia and Russia (refer to figure 2). In 1948, the Tata Motors introduced the firststeam roller in collaboration with Marshall Sons (UK), and in 1954 TELCOstarted to manufacture medium commercial vehicles in a joint venture withDaimler-Benz. After that, in 1971, the Tata Motors was ranked as the firstIndian carmaker company that able to produce direct injection enginesindependently. The first India automobile manufacturer that independentlydeveloped and designed a light commercial vehicle is the Tata 407 (Schuster & Holtbrugge, 2011).
Furthermore,the company also has a leading market position in commercial vehicles in Indiaand continuously increases its market share in different passenger carsegments. In 2009-10, the Tata Motors domestic sales of heavy vehicle and busesincreased by 36.5% to a total of 155, 161. The sales of light commercialvehicles grew by 44.2 % to 218, 681, and sales of passenger cars grew by 25.3%to 260, 020 (Schuster & Holtbrugge, 2011). After a few years, theTata Motors commercial vehicles domestic sales was increased at 40, 447 units,a growth of 62% compared to 24,998 units in December 2016.
The Tata Motors passengervehicles sales performance was also increased at 14, 180 units, which growth of31% over last year in December 2016 (Tata Motors, 2018). Figure2: Tata Motors Worldwide (Tata Motors, 2018) 1.2 Background of JaguarLand Rover Figure3: Logo of Jaguar Land Rover (Sur, 2016)TheJaguar Land Rover (JLR) is Britain’s largest automotive manufacturer whichdesigns, engineer and manufacture in the UK. The Jaguar is more focus onproducing and selling a range of luxury saloons, sports cars and luxuryperformance SUVs and Land Rover, which encompasses a portfolio of the premiumall-terrain vehicle (Jaguar Land Rover, 2014). Tata Motorsacquired Jaguar Land Rover in 2008.Inaddition, the Jaguar vehicles comprise the F-TYPE Coupe and Convertibletwo-seater sports cars, XJ saloons, the XF and XF Sportbrake, and the new XEsports saloons. The Land Rover’s range of products comprises the Range Rover,Range Rover Evoque, Range Rover Sport, the Land Rover Discovery, DiscoverySport and Defender (Jaguar Land Rover, 2015)TheJaguar Land Rover vision is “We are entering the largest, fastest industrialrevolution ever, driven by decarbonisation, air quality, digitization,connectivity, automation, and technology.
Against this backdrop, we see endlessexciting opportunities to create a world in which we will live safer, better, moreconnected and mobile lives” (Jaguar Land Rover, 2017). Moreover, the companymission is “We want to deliver more great products, faster than we have everdone before, we want to be leaders in the field of environmental innovation andwe want to be sure our customers always come first ” (Jaguar Land Lover, 2018). Figure4: Global Footprint Fiscal 2016/17 (Jaguar Land Rover, 2017)Basedon figure 4, the Jaguar Land Rover has four principles automotive manufacturingfacilities in the United Kingdom such as Solihull, Castle Bromwich, Halewoodand the Engine Manufacturing Centre at Wolverhampton. It also has twodevelopment facilities in the United Kingdom at Gaydon and Whitley. Moreover, thecompany also owns a joint venture manufacturing plant under its China JointVenture, in Changshu, near Shanghai. Besides that, the Jaguar Land Rover was alsohas vehicles manufacturing in several countries such as Nitra in Slovakia, Riode Janelro in Brazil, Graz in Australia and Pune, in India (Jaguar Land Rover, 2017).InFiscal 2013/14, the Jaguar Land Rover has grown with revenues of almost 19.
4billion (up 23%) on retail sales of 434, 311 units (up 16%), EBITDA of 3.4billion (up 45%) and profit before tax (PBT) of 2.5 billion (up 49%) (Jaguar Land Rover, 2014). After a few year,the Jaguar Land Rover revenues was increased at 24.3 billion in Fiscal 2016/17,up from the 22.3 billion in Fiscal 2015/16, on retail sales of 604, 009 units(up 16%).
The EBITDA of 3.0 billion (12.1%) in Fiscal 2016/17, down slightlyfrom the EBITDA of 3.1 billion (14.1 %) in the previous fiscal year and profitbefore tax (PBT) of 1.
3 billion in Fiscal 2016/17 (up 21.0%) compared to 15.7percent last year (Jaguar Land Rover, 2017).
Question 22.1 Mechanism that TataMotor used to acquire the Jaguar Land RoverIna Tata Motors, the company refers existing assets of the target as takeover. InJune 2008, the Tata Motors acquired Jaguar Land Rover (JLR) for an amount of$2.3 billion from Ford Motors Company (Collier, 2015). The Ford Motors is ranked as a largestmultinational corporation in the automobile industry.
The company acquiredJaguar and Land Rover, form British Leyland Limited in 1989 for US$ 2.5 billion(Laddha, 2016). In facts, there are many reasonsbehind Ford Motors decision to sell the Jaguar Land Rover. One of the reasons is because the Jaguar LandRover was not performance wells as it was unable to provide any profit for Fordespecially due to high manufacturing costs in United Kingdom. Therefore, due tothis bad reputation and declined in profit, Ford Motors announced that it wasconsidering selling Jaguar Land Rover to Tata Motors at half of the price.TataMotors was interested in acquiring Jaguar Land Rover and the USD 2.3b paid byTata Motors was an all-cash deal.
The Tata Motors secured a $3 billion loanfrom Citigroup and JPMorgan in order to finance the acquisition (Collier, 2015). The deal priceincluded the ownership of Jaguar Land Rover, global network of national salescompanies, royalty-free licenses of all intellectual property right, two designcentres in the United Kingdom and manufacturing plants. In addition, the TataMotors also stood to gain on several fronts form the deal (Laddha, 2016).Ø Theacquisition would help the Tata Motors to enter into the higher premiersegments of the global automobile market.Ø TataMotors also got two advance design studios and technology as part of the deal. Ø Thecost competitive advantages as Corus was the main supplier of automotive highgrade steel to Jaguar Land Rover and other automobile industry in US andEurope.Ø Inthe long run Tata Motors will surely diversify its present dependence on Indianmarkets (which contributed to 90% of Tata revenue). Along with it due to Tatafootprints in South East Asia will help Jaguar Land Rover do diversify itsgeographic dependence from US (30% of volumes) and Western Europe (55% ofvolumes)