Steel-ing the show: What if Tata wins Land Rover bid?

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posted on 16 years ago — updated on 1 second ago

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What does the bid offer to Tata Motors and will it be a stretch financially?

New Delhi: A Jaguar and a Land Rover will be prestige boosters for Tata motors without a doubt. However, what does it offer to Tata Motors and will it be a stretch financially?

It's like coming a full circle. Tata Motors started its truck business in collaboration with the leading European truck maker Daimler Benz in 1954 and has now bid for two iconic European brands, Jaguar and Land Rover, which some say may emerge as the winner. At the outset, Tata Motors globalisation drive will get a boost with this deal, as Jaguar and Land Rover are present together in close to 230 countries.

Jaguar and Land Rover’s cumulative sales of 2.67 lakh vehicles last year will propel Tata's passenger vehicle sales to nearly half a million units. Future generations of Tata's Safari-which was touted as the desi Pajero and its utility vehicle range will get a major tech boost with access to Land Rover's R&D division and Jaguar will bring a prestige factor which is difficult to match by any another brand in India.

However, the question is, at what cost? The expected price of $ 1.8 billion will wipe out a good part of the Rs 7300 crore surplus cash lying with Tata Motors. Even after the acquisition, Tata will have to invest in increasing the competitiveness of the brands. Jaguar and Land Rover has an average annual R&D spend of 450 million pounds or Rs 3,600 crore as compared to Tata Motors' Rs 797 crore last year.

And then will Tata be able to implement JLR's expensive technology in its vehicles in India without pushing up the price significantly? Tata may tap its group companies like Tata Technologies, TCS and TACO for engineering services and components to curtail costs but there may be a limit to shifting production in the deal.

While it may not be too much of a stretch for buying Jaguar and Land Rover given its financial strength, analysts are also concerned that it should not be at the cost of the companies business in the mainstream segments, not to mention the 1-lakh rupee car, that will debut next year.

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