Domestic market still challenging
The Indian economy continued to register impressive GDP growth, although the rate of growth declined marginally over the previous year, reflecting inflationary trends driven by the increase in the cost of energy and raw materials. The level of industrial activity has also begun to decline as a result of fiscal constraints imposed on money supply and the raising of interest rates.
Investment flows into India increased by 20 per cent to a record level of about Rs. 120,000 crores. Investment and consequent growth could have been even greater but for the roadblocks to major investments arising from ideological differences, State-Centre conflicts and vested interests. Some of these self-serving obstacles delayed major projects, depriving the country of the opportunity to bridge the gap in infrastructure, energy, power generation, utilization of vast natural resources and to improve the quality of life of its people.
The Indian automotive sector grew by 10 per cent overall during the year with substantial growth in the light commercial vehicles sector and new passenger car introductions. A total of 499,978 new commercial vehicles were sold during the year, and passenger car sales grew to 1.53 million vehicles this year. Tata Motors registered a growth of 5.5 per cent.
The company introduced several new models and variants of commercial vehicles during the year but was unable to exploit its full market potential due to inadequate deliveries of powertrains and components from major suppliers. It also entered a new market segment through the introduction of a new mini van and mini people’s carrier which are expected to see substantial growth in the years ahead. Sales of Tata Daewoo commercial vehicles increased by 38 per cent and its market share in Korea improved from 26 per cent in 2006-07 to 33 per cent in 2007-08.
In the passenger car segment, delays of the mainstream line of the new Indica and Indigo passenger cars resulted in a decline in sales and market share of the company in the product segments. It is expected that this loss in market share will be regained with the New Indica range which is expected to be launched shortly. The market introduction of Sumo Grande towards the end of the year was well received and its true potential will be realized in the current year.
Perhaps the two most significant events during the year which have had a momentous impact on the scale of Tata Motors’ operations and its global image were the unveiling of its new low-cost car, Nano, and the acquisition of the Jaguar and Land Rover from Ford.
A path-breaking project
Tata Motors embarked on a path-breaking project of developing a ‘peoples’ car’ about four years ago to provide safe, all-weather personal and family transport at an affordable price of Rs. 1 lakh. The goal was considered to be unachievable by many global manufacturing and industry commentators at that time.
The goal was, however, achieved, and the Nano was unveiled at Auto Expo in Delhi in January last. It attracted unprecedented global attention and catapulted Tata Motors onto the world stage. The customer response in India was also unprecedented, and enormous interest in the car was shown by certain foreign countries. Several international manufactures are also now planning to be in the ultra low-cost segment and many of them are looking at India as a possible location for manufacturing such a vehicle.
The company’s new plant for the Nano at Singur in West Bengal is expected to go into operation in the last quarter of this calendar year. Here the manufacturing facilities would be expanded to meet the demand in the domestic and international markets in the future. New variants of the Nano are also currently under development to meet the new environmental and fuel price challenges, as also the market requirement of several international markets.
New acquisition
During the year, Tata Motors expressed its interest in participating in the Ford Motor Company’s intended sale of Jaguar and Land Rover on a going concern basis. Both the brands are highly regarded and have a long heritage in their respective segments. Jaguar has been a prestigious maker of high performance passenger cars with a racing history, and Land Rover has always been the ‘Gold Standard’ for off-road vehicles.
Several international private equity firms and one other Indian automotive manufacturer participated in the process. After a protracted negotiation through out the year, Tata Motors was considered by Ford for focused discussion, with the full support of the unions and the workforce. The two enterprises were formally transferred on June 2 at a signing ceremony at the Jaguar and Land Rover headquarters in West Midlands when history was made and these two globally-renowned brands became Indian-owned.
In these brands, Tata Motors has acquired impressive engineering capabilities, substantial manufacturing facilities, (which reflect the major investments by both Ford and BMW in the past years), and enormous goodwill amongst the dealer network and the Jaguar owners community. There is a need to introduce a greater number of attractive products for both brands, and to rekindle Jaguar’s past image connected with its sports car heritage. Both brands have tremendous unfulfilled market potential and a significant global presence.
To fund the acquisition of Jaguar and Land Rover, Tata Motors is raising Rs. 7,200 crores on a rights basis and $500/600 million through an international offering of equity and/or cost effective quasi equity instruments.
Commercial vehicles
The commercial vehicle industry (including exports) witnessed a moderate growth in 2007-08. The domestic market which accounts for nearly 90 per cent of total commercial vehicle sales was impacted by reduction in economic activity, poor credit availability, hardening of interest rates and increase in fuel prices. It grew by 6.9 per cent as compared to 33 per cent growth in the previous year.
Tata Motors reported a total sale of 3,52,785 commercial vehicles in the domestic and overseas markets representing a growth of 5.5 per cent over last fiscal. However, the company’s market share in the domestic commercial vehicle market declined by 1.3 per cent to 62.7 per cent due to non-availability of certain components/parts in the earlier part of the year and constraints on availability of vehicle finance from banks and NBFCs. Though in-house vehicle financing was strengthened, the company was unable to fully offset the decrease in credit availability from outside sources.
In the M&HCV segment, the company revamped its commercial vehicles portfolio and introduced a wide range of new products such as multi axle and heavy duty trucks, tractor trailers and fully-built solutions like tip trailers, customized factory built load bodies, etc., in the second half of the year. These introductions helped it gain market share in the tractor trailer and multi-axle vehicle sub-segments, and the full potential of these new products would be realized going forward.
The company also developed new products for the M&HCV passenger carrier sub-segment and displayed them at Auto Expo 2008: a 28-seater bus and an air-conditioned low-floor bus developed through the joint venture, Tata Marcopolo Motors Ltd. (TMML).
TMML is engaged in the business of manufacture and sale of fully-built buses and coaches in which the company has a 51 per cent holding with the balance 49 per cent held by Marcopolo S. A. of Brazil. The company started its commercial production in November 2007 and has sold 190 low entry CNG buses. TMML recorded a net turnover of Rs. 6.57 crores and loss after tax is Rs. 3.83 crores.
In the LCV segment, Tata Motors introduced two new products – the Magic and Winger – which have the potential to shape the future of commercial passenger transportation in India. Magic is expected to emerge as a safe and comfortable mode of public transport in urban and rural areas. Alongwith the goods carrier version, Magic helped the company to achieve a sale of over 1,00,000 vehicles on the Ace platform in a year for the first time since inception. Winger, India’s only maxi van offering, could become the preferred mode for intra-city and long-distance passenger transportation in the coming years.
The company also unveiled the 1 ton and CNG variant of Ace, Cargo Panel van, Xenon XT - a lifestyle pick-up truck and Winger Executive office concept vehicle, at Auto Expo 2008, and commenced production of Tata Ace at its manufacturing facility in Uttarakhand. Though the company’s market share in the LCV segment declined by 1.1 per cent to 64.3 per cent, introduction of new products would help the company to grow its market share in the coming years.
The company showcased its new range of tactical and armoured vehicles for military and para-military forces in the Defence Expo 2008. These included Tata light specialist vehicle, light armoured troop carrier, Tata 8x8 HMV and the armoured Tata Safari.
The company’s commercial vehicle exports grew by 11.8 per cent to 39,850 units. M&HCV exports accounting for 35 per cent of the company’s total commercial vehicle exports grew by 13 per cent.
Tata Daewoo
Tata Daewoo Commercial Vehicle Company Ltd. (TDCV), Korea, a 100 per cent subsidiary of Tata Motors is the second largest manufacturer of heavy and medium commercial vehicles in Korea. During the year under review, TDCV registered further growth both in the domestic market and exports. In volume terms, sales of 11,899 units were higher by 38 per cent than in 2006-07. This enabled TDCV to improve its market share from 24.3 per cent to 32.3 per cent in the HCV segment and from 28.2 per cent to 34.8 per cent in the MCV segment. TDCV exported 3,000 units of HCVs during the year (2,715 units in the previous year) and continued to be the largest exporter from Korea in this segment.
TDCV recorded a turnover of Rs. 2,865.02 crores which was higher by 45 per cent compared to Rs. 2,248.81 crores for the previous year. Profit after tax was Rs. 153.11 crores (Rs. 97.46 crores), an increase of 78%.
Looking ahead
The year ahead will pose major challenges. Higher fuel prices will negatively impact both commercial vehicles and passenger car sales. There will be an unprecedented rise in material costs following hike in prices of steel and tyres, besides the impact of tighter money supply and higher interest rates. In addition, the company will have to complete Singur plant construction and introduce its new vehicle Nano in the market. While tackling these challenges, Tata Motors operations will also have to absorb the cost of the JLR acquisition and its integration.
These challenges appear daunting, but to the people in Tata Motors, the year ahead will be no more daunting than the challenges they have faced in difficult years in the past. No words would ever adequately recognize the spirit, dedication and commitment of the people in Tata Motors who have faced adversity and major crises, delivered products which were not considered possible and repeatedly found solutions for situations which have thwarted many an organization. I therefore feel confident that the same spirit, dedication and commitment will enable them to face the challenges ahead and find solutions to ensure the sustainability of Tata Motors’ long term future growth and viability.
Investment flows into India increased by 20 per cent to a record level of about Rs. 120,000 crores. Investment and consequent growth could have been even greater but for the roadblocks to major investments arising from ideological differences, State-Centre conflicts and vested interests. Some of these self-serving obstacles delayed major projects, depriving the country of the opportunity to bridge the gap in infrastructure, energy, power generation, utilization of vast natural resources and to improve the quality of life of its people.
The Indian automotive sector grew by 10 per cent overall during the year with substantial growth in the light commercial vehicles sector and new passenger car introductions. A total of 499,978 new commercial vehicles were sold during the year, and passenger car sales grew to 1.53 million vehicles this year. Tata Motors registered a growth of 5.5 per cent.
The company introduced several new models and variants of commercial vehicles during the year but was unable to exploit its full market potential due to inadequate deliveries of powertrains and components from major suppliers. It also entered a new market segment through the introduction of a new mini van and mini people’s carrier which are expected to see substantial growth in the years ahead. Sales of Tata Daewoo commercial vehicles increased by 38 per cent and its market share in Korea improved from 26 per cent in 2006-07 to 33 per cent in 2007-08.
In the passenger car segment, delays of the mainstream line of the new Indica and Indigo passenger cars resulted in a decline in sales and market share of the company in the product segments. It is expected that this loss in market share will be regained with the New Indica range which is expected to be launched shortly. The market introduction of Sumo Grande towards the end of the year was well received and its true potential will be realized in the current year.
Perhaps the two most significant events during the year which have had a momentous impact on the scale of Tata Motors’ operations and its global image were the unveiling of its new low-cost car, Nano, and the acquisition of the Jaguar and Land Rover from Ford.
A path-breaking project
Tata Motors embarked on a path-breaking project of developing a ‘peoples’ car’ about four years ago to provide safe, all-weather personal and family transport at an affordable price of Rs. 1 lakh. The goal was considered to be unachievable by many global manufacturing and industry commentators at that time.
The goal was, however, achieved, and the Nano was unveiled at Auto Expo in Delhi in January last. It attracted unprecedented global attention and catapulted Tata Motors onto the world stage. The customer response in India was also unprecedented, and enormous interest in the car was shown by certain foreign countries. Several international manufactures are also now planning to be in the ultra low-cost segment and many of them are looking at India as a possible location for manufacturing such a vehicle.
The company’s new plant for the Nano at Singur in West Bengal is expected to go into operation in the last quarter of this calendar year. Here the manufacturing facilities would be expanded to meet the demand in the domestic and international markets in the future. New variants of the Nano are also currently under development to meet the new environmental and fuel price challenges, as also the market requirement of several international markets.
New acquisition
During the year, Tata Motors expressed its interest in participating in the Ford Motor Company’s intended sale of Jaguar and Land Rover on a going concern basis. Both the brands are highly regarded and have a long heritage in their respective segments. Jaguar has been a prestigious maker of high performance passenger cars with a racing history, and Land Rover has always been the ‘Gold Standard’ for off-road vehicles.
Several international private equity firms and one other Indian automotive manufacturer participated in the process. After a protracted negotiation through out the year, Tata Motors was considered by Ford for focused discussion, with the full support of the unions and the workforce. The two enterprises were formally transferred on June 2 at a signing ceremony at the Jaguar and Land Rover headquarters in West Midlands when history was made and these two globally-renowned brands became Indian-owned.In these brands, Tata Motors has acquired impressive engineering capabilities, substantial manufacturing facilities, (which reflect the major investments by both Ford and BMW in the past years), and enormous goodwill amongst the dealer network and the Jaguar owners community. There is a need to introduce a greater number of attractive products for both brands, and to rekindle Jaguar’s past image connected with its sports car heritage. Both brands have tremendous unfulfilled market potential and a significant global presence.
To fund the acquisition of Jaguar and Land Rover, Tata Motors is raising Rs. 7,200 crores on a rights basis and $500/600 million through an international offering of equity and/or cost effective quasi equity instruments.
Commercial vehicles
The commercial vehicle industry (including exports) witnessed a moderate growth in 2007-08. The domestic market which accounts for nearly 90 per cent of total commercial vehicle sales was impacted by reduction in economic activity, poor credit availability, hardening of interest rates and increase in fuel prices. It grew by 6.9 per cent as compared to 33 per cent growth in the previous year.
Tata Motors reported a total sale of 3,52,785 commercial vehicles in the domestic and overseas markets representing a growth of 5.5 per cent over last fiscal. However, the company’s market share in the domestic commercial vehicle market declined by 1.3 per cent to 62.7 per cent due to non-availability of certain components/parts in the earlier part of the year and constraints on availability of vehicle finance from banks and NBFCs. Though in-house vehicle financing was strengthened, the company was unable to fully offset the decrease in credit availability from outside sources.In the M&HCV segment, the company revamped its commercial vehicles portfolio and introduced a wide range of new products such as multi axle and heavy duty trucks, tractor trailers and fully-built solutions like tip trailers, customized factory built load bodies, etc., in the second half of the year. These introductions helped it gain market share in the tractor trailer and multi-axle vehicle sub-segments, and the full potential of these new products would be realized going forward.
The company also developed new products for the M&HCV passenger carrier sub-segment and displayed them at Auto Expo 2008: a 28-seater bus and an air-conditioned low-floor bus developed through the joint venture, Tata Marcopolo Motors Ltd. (TMML).
TMML is engaged in the business of manufacture and sale of fully-built buses and coaches in which the company has a 51 per cent holding with the balance 49 per cent held by Marcopolo S. A. of Brazil. The company started its commercial production in November 2007 and has sold 190 low entry CNG buses. TMML recorded a net turnover of Rs. 6.57 crores and loss after tax is Rs. 3.83 crores.
In the LCV segment, Tata Motors introduced two new products – the Magic and Winger – which have the potential to shape the future of commercial passenger transportation in India. Magic is expected to emerge as a safe and comfortable mode of public transport in urban and rural areas. Alongwith the goods carrier version, Magic helped the company to achieve a sale of over 1,00,000 vehicles on the Ace platform in a year for the first time since inception. Winger, India’s only maxi van offering, could become the preferred mode for intra-city and long-distance passenger transportation in the coming years.
The company also unveiled the 1 ton and CNG variant of Ace, Cargo Panel van, Xenon XT - a lifestyle pick-up truck and Winger Executive office concept vehicle, at Auto Expo 2008, and commenced production of Tata Ace at its manufacturing facility in Uttarakhand. Though the company’s market share in the LCV segment declined by 1.1 per cent to 64.3 per cent, introduction of new products would help the company to grow its market share in the coming years.
The company showcased its new range of tactical and armoured vehicles for military and para-military forces in the Defence Expo 2008. These included Tata light specialist vehicle, light armoured troop carrier, Tata 8x8 HMV and the armoured Tata Safari.
The company’s commercial vehicle exports grew by 11.8 per cent to 39,850 units. M&HCV exports accounting for 35 per cent of the company’s total commercial vehicle exports grew by 13 per cent.
Tata Daewoo
Tata Daewoo Commercial Vehicle Company Ltd. (TDCV), Korea, a 100 per cent subsidiary of Tata Motors is the second largest manufacturer of heavy and medium commercial vehicles in Korea. During the year under review, TDCV registered further growth both in the domestic market and exports. In volume terms, sales of 11,899 units were higher by 38 per cent than in 2006-07. This enabled TDCV to improve its market share from 24.3 per cent to 32.3 per cent in the HCV segment and from 28.2 per cent to 34.8 per cent in the MCV segment. TDCV exported 3,000 units of HCVs during the year (2,715 units in the previous year) and continued to be the largest exporter from Korea in this segment.
TDCV recorded a turnover of Rs. 2,865.02 crores which was higher by 45 per cent compared to Rs. 2,248.81 crores for the previous year. Profit after tax was Rs. 153.11 crores (Rs. 97.46 crores), an increase of 78%.
Looking ahead
The year ahead will pose major challenges. Higher fuel prices will negatively impact both commercial vehicles and passenger car sales. There will be an unprecedented rise in material costs following hike in prices of steel and tyres, besides the impact of tighter money supply and higher interest rates. In addition, the company will have to complete Singur plant construction and introduce its new vehicle Nano in the market. While tackling these challenges, Tata Motors operations will also have to absorb the cost of the JLR acquisition and its integration.
These challenges appear daunting, but to the people in Tata Motors, the year ahead will be no more daunting than the challenges they have faced in difficult years in the past. No words would ever adequately recognize the spirit, dedication and commitment of the people in Tata Motors who have faced adversity and major crises, delivered products which were not considered possible and repeatedly found solutions for situations which have thwarted many an organization. I therefore feel confident that the same spirit, dedication and commitment will enable them to face the challenges ahead and find solutions to ensure the sustainability of Tata Motors’ long term future growth and viability.
Despite the challenges mentioned, Tata Motors will have an exciting future. Apart from its own growth domestically in both the commercial vehicle and passenger car areas, for which it has ambitious plans, the high volumes of the NANO range will dramatically change Tata Motors’ market position, reach and visibility. Internationally the Jaguar and Land Rover brands will add global scale, profits and visibility to Tata Motors, enabling it to take its place in the global auto industry as a credible international automobile company.
“Innovation and manufacturing excellence will continue to contribute strongly to our business growth in India and across Asia,” said Mr. Jacques Esculier. “By expanding engineering and production capabilities in India, we can continually improve the supply chain and better serve customers locally as well as globally. We expect our newest factories in India to join the same world-class TPM excellence league as our brakes factory in Ambattur.”
RBL’s current capacity for manufacturing disc pads is 10 million units at its Chennai and Puducherry facilities. The new plant is built for a capacity to manufacture 10 million units, which will be achieved by 2001-12. The company proposes an investment of Rs. 60 crores for this project. Once this plant fully operational, RBL will have a capacity to manufacture 20 million disc pads by 2011-12. The company clocked a turnover of Rs. 180 crores for 2007-08.
“Manufacturing Excellence and Benchmarking of Quality will continue to contribute strongly to our business growth as a group,” said Mr. Ganesh. “By expanding our capacities and capabilities, our constant endeavour is to continually improve the supply chain and better serve customers locally as well as globally. The new RBL plant in Trichy is a state-of-the-art facility. This will be the most modern asbestos-free disc pad plant in India”.
Indo US MIM currently has two manufacturing facilities located on the outskirts of Bangalore city. Both the plants are certified to ISO 9001:2000 and to ISO/TS 16949:2002. The company has so far invested over Rs. 100 crores since inception.
The family has been associated with the bus business for over 80 years now and Mr. Kesineni has been personally in charge of the business for over 25 years. It was in 1992 that he started his own bus company Kesineni Tours and Travels. Today it is the largest provider of inter-city bus transportation, serving more than 75 destinations with about 430 schedules daily across Andhra Pradesh, Karnataka, Maharashtra and Tamil Nadu. More than 15 lakh customers travel each year on Kesineni’s buses.
The online bus ticketing system was inaugurated last year, precisely on July 7. While some bus operators keep a quota of seats on the Internet booking, Kesineni’s Online reservation system ensures that all the seats are kept open for booking on the Net. The system is the main foundation for the future expansion plans of the company, says Mr. Kesineni.
The company is dedicated to the highest quality bus manufacturing and believes in continuous improvement, setting new standards and pushing technology to new heights. Thorough attention to detail in the design stage and in the manufacturing process, Veera’s buses provide greater reliability and less vehicle down-time.
In the next phase, Veera is planning to establish its second manufacturing facility where it plans to get into mass production of buses, particularly for the city bus segment. Mr. Srinivas Reddy feels that the city bus market will witness exponential growth as most of transport corporations are replenishing their fleet.
Intergral coaches is another very big opportunity which Veera is looking to capitalise on. As more and more private bus operators and even transport corporations are looking at fully built solutions, the market for integral coaches will witness exponential growth in the coming years. The company is already working on its Integral coach business and hopes to roll out the first bus by 2010.
“We have been growing in a falling market. The industry has seen a slowdown not because of the market needs or potential but more because of the reluctance of the financing agencies to support retail financing. That has now come to a very critical situation. In 2008, particularly in the last 2 to 3 months the situation has become more stressful for the industry. The financing companies are selective in financing and have not been as generous and liberal as they have been in the past. Their expectations of higher down payments, and higher EMIs has certainly impacted the growth”, adds Mr. Chopra.
Caterpillar Logistics Services India Private Ltd. in Bangalore develops logistics technologies and provides logistics services for Caterpillar in India. Together, Caterpillar and its dealers in India have nearly 4,500 employees. Due to the investment in operations and anticipated increases in its business to support a growing base of customers, Caterpillar plans to significantly increase employment in India over the next several years.
The park, which would be completed in phases with the first phase operational by 2010 is estimated to provide both direct and indirect employment to thousands of people. Caparo has acquired 2,000 acres for the industrial park, part of which will be earmarked as a Special Economic Zone. The site was selected because of its proximity to Chennai and Krishnapatnam ports. 
Mr. Gogia further said: “Actros is the fastest growing product in its segment and has helped optimize return on investment for its customers because of its low operating costs, minimal maintenance requirements and driver-friendly technology. For example, the pollen-grain filter prevents dust from entering the cabin, thus improving the working ambience of the drivers. The sum of many small and big measures ultimately make the Actros a product that delivers optimum returns.”
