The Sun Rises on an Indian Auto Empire: Tata to Buy Jag, Rover
December 24, 2007

By Nick Kurczewski

MUMBAI, India — Just in time for Christmas, it appears Tata Motors will win the right to purchase what might be the ultimate bargain of the automotive world: The Mumbai-based auto manufacturer has completed the purchase of Jaguar and Land Rover from the beleaguered Ford Motor Company. 

Ford originally bought these icons of the British motoring industry for well more than $5 billion, but the reported price Tata paid is estimated to be less than half that, somewhere in the region of $2 billion.

It is likely the announcement Tata will purchase the two marques will come early in 2008, with Ford and/or Tata officials perhaps confirming the deal either at the New Delhi Auto Expo on Jan. 10 or a few days later at the Detroit auto show. A British newspaper earlier reported the deal would be announced before the holidays.

Many had considered Tata an outsider in the bidding war that was building for Jaguar and Land Rover. The Indian auto manufacturer is part of the Tata Group of companies, an intricate web of businesses with interests in everything from hotels (Tata is controlling owner of the famed Pierre Hotel in New York City) to heavy-duty trucks and tea. But it’s Tata Motors’ lineup of bargain-basement consumer cars and trucks that made a union with luxury manufacturers like Jaguar and Land Rover seem such an unlikely match to many auto analysts.

 
Until now, Tata had grabbed headlines primarily for its announcement of a “1-lakh” car, set to be unveiled at the New Delhi Auto Expo in early January.  With a sticker price of only $2,500, this new (and still nameless) vehicle will employ a wide range of cost-cutting techniques in its move to lure Indians off their mopeds and scooters and into a Tata automobile. Yet even with intensive use of plastics, small and economical engines and very limited options (not to mention the cheap labor provided by building the car in India) it remains to be seen how receptive buyers will be when this ultra-Spartan car goes on sale in India later in 2008.

It is also unclear as to how a manufacturer intent on building the world’s cheapest car will mesh with the high-brow lineup and image of Jaguar and the genteel, country-farmer image of Land Rover.

Ratan Tata, chairman of the Tata Group, recently was quoted stating that a hands-off approach works best with any iconic brand. The not-so-hidden meaning behind these comments implies that Jaguars and Land Rovers will remain quintessentially British. So Tata appears to understand it wouldn't be a good idea to manufacture any $2,500 Jaguars, or have a Land Rover sport-utility to roll off the same production lines that piece together Tata’s working-class range of cars. Cost savings for both luxury nameplates is likely to be more hidden, and could be done via parts production in India, while final assembly remains in Britain.

 
Tata Motors doesn’t appear to lack in ambition with news of this purchase.  The company now has a targeted presence at both the highest and lowest ends of the automotive market. However, it will take several years – and untold millions of additional development dollars from Tata – before it’s clear whether ambition, bold expansion plans, and a hands-off approach to ownership are enough for Tata to succeed where Ford failed.   

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