competitor_analysis_of_tata_motors.doc (Size: 153.5 KB / Downloads: 409)
Tata Motors is a company of the Tata and Sons Group, founded by Jamshetji Tata and is currently headed by Ratan Tata who is the chairman. The company has the workforce of 22000 employees working in its three plants and other regional and zonal offices across
the country. This report analyses the current market position of Tata Motors and gives details regarding the company’s plans and strategies for growth in the future.
Maruti Udyog Limited (MUL) was established in February 1981, though the actual production commenced in 1983 with the Maruti 800, based on the Suzuki Alto keicar which at the time was the only modern car available in India, its' only competitors- the Hindustan Ambassador and Premier Padmini were both around 25 years out of date at that point. Through 2004, Maruti has produced over 5 Million vehicles. Marutis are sold in India and various several other countries, depending upon export orders. Cars similar to Marutis (but not manufactured by Maruti Udyog) are sold by Suzuki in Pakistan and other South Asian countries.
The report captures a detailed SWOT and PEST analysis of these two Indian automobile companies and tries to arrive at a conclusion based on observations.
Introduction -Automobile Market in India
The automobile industry in India, the tenth largest in the world with an annual production of approximately 2 million units, is expected to become one of the major global automotive industries in the coming years. A number of domestic companies produce automobiles in India and the growing presence of multinational investment, too, has led to an increase in overall growth. Following the economic reforms of 1991 the Indian automotive industry has demonstrated sustained growth as a result of increased competitiveness and relaxed restrictions
In 1953, the government of India and the Indian private sector initiated manufacturing processes to help develop the automobile industry, which had emerged by the 1940s in a nascent form. Between 1970 to the economic liberalization of 1991, the automobile industry continued to grow at a slow pace due to the many government restrictions. A number of Indian manufactures appeared between 1970-1980.Japanese manufacturers entered the Indian market ultimately leading to the establishment of Maruti Udyog. A number of foreign firms initiated joint ventures with Indian companies.
Following the economic reforms of 1991, the automobile section underwent delicensing and opened up for 100 percent Foreign Direct Investment. A surge in economic growth rate and purchasing power led to growth in the Indian automobile industry, which grew at a rate of 17% on an average since the economic reforms of 1991. The industry provided employment to a total of 13.1 million people as of 2006-07, which includes direct and indirect employment. The export sector grew at a rate of 30% per year during early 21st century. However, the overall contribution of automobile industry in India to the world remains low as of 2007. Increased presence of multiple automobile manufacturers has led to market competitiveness and availability of options at competitive costs
India’s car market has emerged as one of the fastest growing in the world. The number of cars sold domestically is projected to double by 2010, and domestic production is skyrocketing as foreign makers are setting up their own production plants in India. The government’s 10-year plan aims to create a $145 billion auto industry by 2016.
According to McKinsey, the auto sector’s drive to lower costs will push outsourcing. The auto sector could be worth $375 billion by 2015, up from $65 billion in 2002. McKinsey thinks India could capture $25 billion of this amount. Out of 400 Indian suppliers, 80 percent have the ISO 9000 certificate—the international standard for quality management
Tata Motors Limited, formerly known as TELCO (TATA Engineering and Locomotive Company), was formed in 1954. It is the only fully integrated automobile manufacturer that now stands as India's largest and the world’s 5th largest passenger automobile and commercial vehicle manufacturing company with a product range designed to meet national and international transportation needs.
Tata Motors has a wide portfolio ranging from a Tata Mercedez Benz truck to diversifying into passenger cars like Tata Sierra,Tata Estate,Tata Indigo and Indica, concept vehicles like Aria Roadster and Tata Elegante, commercial vehicles like Tata heavy trucks and military vehicles.
Tata Motors was first listed on the NYSE in 2004. It created wealth of Rs. 320bn during 2001-2006 and stood among top 10 wealth creators in India. It has its manufacturing bases in Jamshedpur, Lucknow and Pune. Tata Motors has recently had a couple of important mergers and acquisitions like with JLR in UK, Daewoo in South Korea, Hispanso and a JV with Fiat.
Post liberalization, in order to expand rapidly, the company adopted the route to joint ventures (JV):
• 21% stake in Hispano Carrocera, a Spanish bus manufacturing company and introducing its high-end inter-city buses in the country.
• Acquisition of Jaguar and Land Rover of UK, help complete its portfolio in the premium segment
• A 70% JV with Thailand’s Thonburi (auto assembler) which will set up a plant to manufacture pick-ups and will sell them in Thailand.
• The 25MT GVW Tata Novus launched from Daewoo’s platform (TDCV Tata Daewoo Commercial Vehicle Company).
• 51:49 JV with Brazilian based Marcopolo (bus building). This JV is to manufacture and assemble fully-built buses and coaches targeted at developing mass rapid transportation systems.
• In 1993, it started manufacture of high horsepower and emission friendly diesel engines in an effort to reduce the pollution in the existing Tata engines and to produce more environmentally friendly engines.
• In 2000, it launched CNG buses and filled the product line gap through the introduction of the 1109 vehicle which is an intermediate commercial vehicle and is useful for medium tonnage loads.
• Its Ex- series vehicles have high tonnage capacity and high pick up and the LCV (207 DI) with direct ignition technology caters to the customers' requiring one and same vehicle for commercial as well as personal use.
• Tata Motors has a high domestic exposure of ~94% in the MHCV (Medium & Heavy Commercial Vehicles) segment and ~84% in the LCV segment.
• The latest hit of Tata Motors is its mini truck Ace which is India's first indigenously developed sub-one ton mini-truck. Ace has rapidly emerged as the first choice for transporters and single truck owners for city and rural transport.
• The only major engine manufacturer in the world to express any formal interest in the turbulence-boosting cylinder head grooves
• There is definite cost advantage as labor cost is 8-9 per cent of sales as against 30-35 per cent of sales in developed economies.
• Tata motors have extensive backward and forward linkages and it is strongly interwoven with machine tools and metals sectors. Also, India is an excellent source for IT based engineering solution for products & process Integration.
• Tata Motors' range of passenger cars is still not comprehensive by industry standards. It has a limited product portfolio which has given its key competitors (Hyundai motors, Maruti Suzuki) an extra edge.
• Even after being in the passenger cars market for quite some time, somewhere in the minds of consumers Tata motors is still synonymous with heavy and commercial vehicle makers and not passenger car makers. Also because of this consumers may think the passenger cars can lack aesthetics and are more built for robustness.
• According to auto experts, low cost is a stronger motive at Tata Motors that sometimes makes quality take a backseat.
• The company is overstaffed and hence human resource utilization is sub optimal.
• Also decision making gets a hard hit due to extensive hierarchy prevalent at Tata Motors.
• They do not have a presence in high volume markets like America and most parts of Europe.
• Not very high car sales volume which hampers their future plans like increasing their production and expansion.
• Tata plans to leverage on the strong presence of TDCV in the heavy-tonnage range and introduce products in India at an appropriate time.
• The JV with Marcopolo will be beneficial to both companies since the latter will absorb technology and expertise in chassis and aggregates from Tata Motors, and Marcopolo will provide know-how in processes and systems for bodybuilding and bus body design.
• JV with Fiat, it is likely to gain access to Fiat’s diesel technology and to the latter’s strong overseas distribution network for its passenger cars.
• Tata Motors may extend this relationship to other segments like pick-ups and MHCVs.
• Launch of the global truck will mark the entry of the company into developed markets like Europe and the USA. Working with Iveco means that the designs will be in sync with the needs of sophisticated European customers.
• GOI policy for modernizing of vehicles to arrest degradation of air quality and move toward international taxing policies linked to age of vehicles, are steps which will lead to increased sales for TATA motors Commercial vehicle division.
• The cut in excise duty that enabled manufacturers like TATA Motors to reduce prices
• The need to transport higher volumes of agricultural and industrial goods.
• The cut in tariff on petroleum and diesel from 8 per cent to 6 per cent will make commercial vehicles more competitive in the export market.
• Development of the national highway development program will increase TATA sales in the long run.
• Tata has developed a car it aims to sell for about $2,500 USD, which would be considered the cheapest vehicle ever made in real terms.
• There is huge demand in domestic markets due to infrastructure developments and Tata Motors is able to leverage its knowledge of Indian market. There are favorable Government polices and regulations to boost the auto industry i.e. Incentive for R&D.