INTERNATIONAL BUSINESS PROJECT

JLR IN TROUBLED WATERS: WHERE

DOES IT TAKE TATA MOTORS?

Presented by Group 5, Section A:

Aakrati Khandelwal - 180103002
Akshit Ahuja - 180103023
Amruta Kulkarni - 180102017
Rohan Ghosh - 180103166
Shiva Sareen - 180103196
Tanmay Vaidya - 180101112
 BACKGROUND OF THE STUDY
• Tata Motors acquired Jaguar Land Rover (JLR) ten years ago, amidst
much public fanfare and experts’ furore
• Jaguar and Land Rover were two of the biggest names in the British
automobile industry, both owned by the Ford Motor Company
• The scepticism surrounding the takeover was initially proved wrong, as
JLR became a cash cow for Tata Motors and the Tata Group
• Subsequent troubles at JLR has put the takeover under scrutiny in the
recent past, leading to adverse impact on the strategy and operations
at Tata Motors
 SCOPE OF THE STUDY
• The scope of this study is centred around Tata Motors’ acquisition of
Jaguar Land Rover (JLR) and the subsequent impact of the same on the
fortunes of the parent company
• The study will look into certain key areas, such as:
The association between the two entities
The impact of the association
The roles played out by either party
The troubles faced by either party
The likely path going forward
 DATA SOURCES
• The following sources have been used as reference points for the purpose of this
study:
 Business Today Magazine
 www.livemint.com
 www.econominctimes.indiatimes.com
 Bloomberg Quint
 Forbes Magazine
 AutoCar Professional Magazine
 https://asia.nikkei.com
 https://auto.economictimes.indiatimes.com
 RELEVANT INFORMATION ABOUT THE CO.
• Tata Motors was founded in 1945 by JRD Tata and is India’s largest
automobile company
• The company is India’s market leader in Commercial Vehicles and
among the Top 5 in Passenger Vehicles
• Tata Motors acquired JLR from Ford Motor Company in 2008, but JLR
remained an independent company headquartered in the UK
• The acquisition of JLR was widely perceived to be a risky move
• JLR managed to generate a lot of cash for Tata Motors, accounting for
56% of Tata Group’s profits in 2015
 POSITION & COMPETITION OF TATA MOTORS

Market Share of M & HCVs Market Share of LCVs

16.4
21.0

41.2

51.0

32.6

37.8

Tata Motors Ashok Leyland Others Tata Motors Mahindra & Mahindra Others

Source: Business Standard, FY19

POSITION & COMPETITION OF TATA MOTORS

Market Share of PVs

13.21

4.88
6.75

52.54
6.93

15.69

Maruti Suzuki Hyundai M&M Tata Motors Honda Others

Source: The Economic Times, 2018

 JLR’S ASSOCIATION WITH TATA MOTORS
• Jaguar Land Rover was taken over by Tata Motors for a consideration of
USD 2.3 billion on 2nd June, 2008
• JLR was previously under the ownership of the Ford Motor Company
• The deal also included the royalty-free use of all necessary IPRs of JLR,
their manufacturing units, design centres and global distribution
networks
• Ford contributed about USD 600 million to JLR’s pension plans
• Tata Motors kept the manufacturing centred in the UK, and took steps
to preserve the brand image and keep the workforce intact
 WHY THE JLR DEAL?

• For Tata Motors, the JLR deal provided them a chance to step into the
global luxury automobile league
• JLR had well established manufacturing and design plants already set
up and spread across the UK
• Heavy investments made previously by Ford could provide good
returns
• JLR’s knowhow in this division could only benefit Tata Motors, who had
only recently entered the passenger vehicles market
 IMPACT OF THE JLR DEAL
• JLR turned into a cash cow for Tata Investment vs Return for Tata
PBT Investment
Motors, accounting for 78% of the 7

sales of Tata Motors Ltd (as per 6 3.1

2.7
3.4
Bloomberg Quint, August 2018) 3.1

Amount (in GBP ‘billion)

5
2.1
4
• Returns have been the result of 1.6
3 2.5 2.6
significant investment, which has 0.9
1.7 1.6 1.6
2 1.5
led to a growing quantum of debt 1 0.7
1.1

0.6
for Tata Motors 0 -0.4
-0.05

-1

Financial Year

Source: AutoCar Professional, 2018

 JLR’S ROLE IN TATA MOTORS’ BUSINESS
• In the present day, JLR dominates the global passenger vehicles sales of Tata Motors

• Tata Motors is heavily dependent Worldwide Sales of PVs in

on the sales of JLR around the FY 2016-17
world, especially in the main
157188
target markets of Europe, the USA 178751
Jaguar
and China
• JLR consistently contributes Land Rover

between 75% to 90% of revenues Tata Motors

for Tata Motors

622055

Source: The Economic Times, April 2017

 TATA MOTORS’ INTERNATIONAL BUSINESS
• Tata Motor’s CVs journey round the world:
• With a presence in over 46 countries, Tata Motors is often touted among the top 10 CV
makers in the world today
• Lets us have a look at some of the important milestones in the CV sector achieved abroad
•JV with Nitol Motors, to set up NITA Company Ltd., company’s first assembly set up outside India
1991 •Growth of assembly operations in different form across Myanmar, Vietnam, Bangladesh, Ukraine, South Africa, Kenya, Senegal, Nigeria

• Tata Motors’s JV with Cummins Engine Ltd., which enabled Tata to produce powerful diesel engine with less carbon emissions
1993

• Tata Motors listing in the New York Stock Exchange in this year.
2004 • Acquisition of South Korean truck manufacturer Daewoo.

• Tata Motors join hands with Brazil based Marcopolo S.A. and launched the Tata Marcopolo Bus in the following years
2006

• Tata Motors Thailand, Tata Motors first national sale company in the global market
2008

• Acquisition of the Spanish bus and coach manufacturer Hispano Carrocera. Starbus and Globus range of buses, manufactured by
2009 this new venture, rolled out in the coming years.

• Tata Motors Indonesia was established as a fully owned subsidiary of Tata Motors
2011

• Launch of Tata Prima in markets around the world

2012

• Tata Ultra launch in the international market

2014
 TATA MOTORS’ INTERNATIONAL BUSINESS
• Tata Motor’s PVs journey round the world:
• Just like the CV segment, the PVs segment made its foray into nations across the globe
• Lets us have a look at some of the important milestones in the PV sector achieved abroad

• Tata Motors PVs make their entry in Nepal in 2003

APAC
• Operations commenced in Sri Lanka in 2004
• Bangladesh : 2012
• Myanmar : 2013
• Philippines : 2014

• Tata Motors PV make their entry into Africa with South Africa in 2004

Africa •
•
•
Tanzania : 2005
Ghana : 2006
Algeria : 2014

Latin America
• PVs sector begin its operation in Latin America by venturing into Uruguay in
2014
• Bolivia : 2015

Europe • Tata Motors enters the European Market after the acquisition of Jaguar and Land
Rover from Ford Motor Co. in 2008
 RECENT TROUBLES AT JLR
• After sailing seamlessly over FY10-18 in the diesel – fed portfolio, JLR is hitting the rough grounds
for the first time since Tata Motors takeover
• In July, JLR reported a decline of 22% in the global retail sales, owing to the transitional issues in
some markets
• JLR is losing heavily in the UK, where the retail sales recorded a slump by 13% in the fiscal year
FY18, after a promising double-digit growth for three year
• JLR has been dealing with declining sales in the European markets amid the growing scepticism
over diesel vehicles, tougher emission rules, resulting in drop in sales by 5%
• In North America, JLR maintained that it was letting go of some higher discounted business plus a
delayed timeline for new launches that also resulted in a demand slump
• In China, the demand is facing a slump owing to rising trade tensions with the US, thus further
posing a threat to the sales in the region
• Some critics also point out the fact that JLR has lost out on innovative new launches to lure more
customer in the high end luxury market
 IMPACT OF JLR’S TROUBLES
• In the wake of the rising global challenges and the perfect storm conditions engulfing JLR,
the share price of Tata Motors has taken a beat in the recent months
• The company’s share price has declined 40% over the last one year, which in fact was
cited to be among the worse performing automative stocks in the world
• Apart from the macroeconomic headwinds, the dramatic changes faced by the
automobile industry with rising technological disruptions in the form of Autonomous,
Connected, Electric and Shared technologies, requires huge investments, thus posing a
threat to the business’s operating leverage
• These factors ultimately impacts the profitability and cash flows of the organisation
• In an effort to turn around the business, the company is set out to implement a turnaround
plan – to enable cost cutting and urge cash flows, both in its domestic and global business
 LIKELY IMPACT OF BREXIT
• Tata Motors faces the threat of a significant loss in revenues of its subsidiary JLR, in the
event of Britain’s exit from the European Union
• A major driver for the revenue hit comes from the 10% levy on vehicles exported from
Europe that are produced in the UK, no longer a part of the EU and also a 4% levy on
import components for the production of vehicles
• Imposition of taxes to sell these vehicles in other European countries will make these
vehicles less competitive in terms of pricing, thus posing an adverse impact on JLR’s
margins and its free cash flows
• Tata Motors also announced a cut in the production schedule at the Castle Bromwich
plant, which will result in nearly 1000 workers at the plant shifting to a 3 day schedule
from a standard 5 day one
• Brexit is also likely to impact JLR’s future investment in UK, which also poses a threat to its
future operation in the region
 FUTURE OUTLOOK FOR TATA MOTORS
• With the luxury car unit of Tata Motors, JLR caught amidst a perfect storm in all its key markets, struck by
the trade tensions between US and China and a slumping demand for diesel vehicles in Europe and
worries over Brexit – Tata Motors has announced a turnaround plan – Project Charge
• Under Project Charge Tata Motors announced its skeleton to cut costs and urge increased cash flows into
the JLR by $3.2 Million in over 18 months
• Going under the knife are material costs, marketing, sales and logistics cost; and employee count
• JLR also plans to launch new vehicles including Jaguar I – Pace and Range Rover Defender over the next
few years and also plans to come up with hybrid or electric versions of all of its model by 2020
• The company plans to follow a product offensive and calibrated investment plan for long-term sustainable
growth
• In India, Tata Motors is going by the theme of ‘Smart Mobility, Smart Cities’ , focusing on intelligently
connected cities that offers a mix of convenience, safety, security and efficiency to its customers
• In line with the government mission for electric vehicles by 2030, Tata Motors is set to launch EV products
in the personal and mass mobility segment
THANK YOU!