International Business and Economics
Amsterdam Business School, 2010
Tata Motors is an automotive company to take notice of. Representing the evolving Indian population and growing economy of one of the world’s key emerging markets, it is a market leader for commercial vehicles and third for passenger vehicles in the Indian market. It shocked the world by introducing the $2000 Nano in 2009 and also by growing its portfolio by purchasing Jaguar Land Rover, a company that at first glance embodies values and skills very different to its own. At the same time, Tata Motors has also made some very smart global moves through its purposeful joint ventures and subsidiaries and through its product adaptions to the local markets. However, Tata Motors needs to fully understand its domestic market, as well as the global automotive industry, in order to create a strategy that will ensure its future total success. History of Tata Motors
Tata Motors began manufacturing vehicles in 1954, though the company was established before that, in 1945 for locomotive manufacturing. Its first commercial vehicle in 1954 was created through a partnership with Daimler-Benz AG. In 1991 it expanded and entered the passenger vehicle market with its Tata Sierra. Currently Tata Motors operates in 35 countries, especially focusing on markets with conditions similar to India, such as Russia, Turkey, and many African nations. It is currently the Indian market leader in commercial vehicles, and they are expected to produce almost 400,000 in FY2010. The product line for commercial vehicles includes all sizes and styles of trucks and buses. Tata Motors produces less passenger vehicles than CVs, with an expected output of almost 300,000 for FY2010. The most popular product in India is the Indica Vista, a small hatchback car (see appendix for image). The Indian economy and its automobile market
To a great extent Tata Motors will see its future success plotted as a function of the overall Indian economy. India is the second most populous nation in the world with 1.18 billion people, so the buying habits of the domestic market will have a powerful impact on the bottom line. As the Indian economy grows, so will the wealth of its citizens (especially the middle-class), and therefore also the number of automobiles purchased. The outlook of the Indian economy is very positive with the highest expected growth rate of GDP compared to other emerging markets until 2050 (see the appendix for historical Indian GDP trends). With this growth comes increasing wealth of all citizens, and changes in lifestyle are already being observed. The population is becoming younger, and with youth comes less prudence and more superficiality (i.e purchases of goods). Additionally, as income increases, so does disposable income, meaning that more money can be set aside for items that are not basic necessities but rather “splurges”. Automobiles would be a key product in this category, with ownership of automobiles becoming a key symbol of ones increasing status. As such, India is already the second fastest growing automobile market (after China). In this sense, the automobile revolution in India has already begun, but there is still a long way to go. Currently ownership of automobiles in India is reserved for only 12 out of 1000 people. This ranks them #102 in the world, behind Haiti, and a very long way from more developed nations such as the U.S. (765 out of 1000) and the Netherlands (412 out of 1000). In this sense the market has a long way to go until becoming saturated. The government and state bank are also playing in a role in increasing automobile purchases/reliance. For example, recently the government has invested in a massive infrastructure implementation, including better highways for dense areas of traffic, new routes to travel between cities, and better maintenance of national highways. All of these actions...