Column : Globalising Tata Motors

Written by Rishi Raj | Updated: Jan 11 2012, 08:28am hrs
At his recent interaction with editors, Tata Group chairman Ratan Tata made a very pertinent point. He said that group company Tata Motors, which happens to be the countrys largest automobile company and its third largest passenger car maker, should now be seen as a global company and not merely as Tata Motors India or Tata Motors UK. More importantly, he remarked that in the next 2-3 years there would be substantial integration of Jaguar Land Rover (JLR) technologies and platform into Tata Motors India products. His managing director at Tata Motors (India), PM Telang, was more precise when he explained what Tata meant, stating that the synergies will narrow the technology gap between Tata Motors offerings in India and other world-class car makers.

The timing of Tata and Telangs remarks could not have been better. It was the day the 11th Auto Expo was opening in the Capital, with almost all the global passenger car manufacturers either present in India or planning to enter set to showcase their might.

More than a decade after it forayed into the passenger car segment with the launch of the Indica, the company faces a typical problemthat of breaking from the mould of a commercial vehicle manufacturer. Its not that in terms of monthly sales the Indica or the Indigo do badly. Quite the contrary, they sell and there was a month when the sales of Tatas passenger vehicles had overtaken Hyundai Motors, which is otherwise the second-largest after Maruti Suzuki. The problem is that in terms of branding they have failedthe cars are mostly seen as fuel-efficient diesel vehicles, mostly fit to be used as taxis rather than as a proud possession of a consumer who flaunts them in terms of style. So strong is the brand perception of Tata cars as taxis that its small car Nano, which has failed in India, is being used as a taxi in Sri Lanka and Nepal!

While it is true that Tata passenger vehicles nevertheless sell, the bulk of the companys sales come from commercial vehicles rather than passenger cars, which is otherwise not the industry trend. Of the total 28.43 lakh vehicles sold in the country (passenger and commercial) in 2010-11, commercial vehicles accounted for only 11.3%. But in case of Tata Motors, during the same year, out of total sales of 8,36,629 units, 5,09,072 came from commercial vehicles, leaving the share of passenger cars at 3,27,557 units. Clearly, the company is still seen more as a commercial vehicle manufacturer rather than as a passenger car marker, and even where it makes passenger cars they are mostly used for commercial purposes.

This dilemma is largely limited to Tata Motors as its prime competitors like Maruti Suzuki and Hyundai Motor are not in the commercial space. Although Mahindra & Mahindra is in the farm space by making tractors, it has been quite successful in carving a strong niche, both in terms of sales and branding, in the sports utility vehicle segment with its offerings.

The problem Tata Motors faces in the passenger car segment is because of its swadeshi roots. Barring it, all major manufacturers offering cars are global playersMaruti has Suzuki, Hyundai is South Korean, Honda is Japanese, General Motors is American. Global manufacturers have technology and research & development expertise on their side and therefore are able to develop newer vehicles on separate

technology platforms. Today, when a consumer changes his car in a metro or tier-1 city roughly every four years, new offerings on new technology platforms are a must or else brand fatigue sets in. Put simply, an Indian consumer today buys a global car not an Indian one.

The limitation of Tata Motors is best seen at any auto show, the most recent being the Auto Expo in Delhi. While all other manufacturers attracted crowds to their pavilions to showcase their future launches and concepts, Tata Motors mostly had the diesel and electric versions of the Nano on show.

When Tata Motors got into the costly acquisition of JLR in 2008, the idea must have been to unshackle itself from this limitation. To be successful in India in terms of brand, a global technology platform was a must. However, JLR had its own problems but now with its turnaround, Tata Motors can think of integrating the technology platform of JLR to offer global products to Indian customers.

How much and how fast the company is able to do it, however, will depend on the way it integrates the functioning of its India and UK units after the stepping down of its group CEO Carl-Peter Forster. After his resignation, the different CEOs of Tata Motors and JLR report directly to the board and the company has made it clear that it is not looking to fill the slot of the group CEO. The retirement of Telang is also due in June this year. It remains to be seen who is appointed as his successor because any executive, however brilliant and efficient he is, if born in Tata Motors would basically have the DNA of a commercial vehicle manufacturer, and whether he would be able to do justice to the uplifting of the passenger cars remains doubtful. The company needs a Forster-like group CEO who knows the global passenger car market well and can bring about the integration between Tata Motors and JLR swiftly and successfully.