ByPruet SitthithanakulSiriporn LukpipatVinodh Gopal

BUSINESS POLICY

Tata MotorsGrowth through M&A and JVs

28.11.2015

HISTORY OF TATA MOTORS

1945 – Founded by JRD Tata as locomotives manufacturer

1954 - First commercial vehicle through collaboration with

Daimler-Benz

▪ Ranked 263 in Fortune 500 ranking in 2015 with revenue

of $ 42.3 Billion

▪ Ranked 17th largest motor vehicle manufacturing

company

▪ Ranked 4th largest truck manufacturer

▪ Ranked 2nd largest bus manufacturer

JRD Tata

In the year 2004, Tata Motors embarked on a major Strategic Change by

looking into export markets and aiming to become a global player

INDUSTRY BACKGROUND

Automotive Industry – Four Segments

▪ Passenger Cars

▪ Light Commercial Vehicles

▪ Heavy Commercial Vehicles

▪ Buses and Coaches

INDUSTRY BACKGROUNDSl

NoSegment

Threat of New

EntrantsThreat of Substitutes

Bargaining power of

suppliers

Bargaining power of

buyersIndustry Rivalry

1Passenger

Vehicles (Cars)

Low

Requires massive

capital, R&D and

brand recognition

Moderate

Present day traffic

encourages more public

transportation

Moderate

The suppliers are

present for every

component such as

body, engines,

controls, tires,

painting, steel etc.,

These suppliers are

becoming mega

suppliers due to M&A

activities with global

network. The influence

is on the rise as they

supply to virtually all

brands

Top 100 global

suppliers, their

contribution volume

and revenues are

attached as Annexure

to this Exhibit

High

Due to the presence of

wide variety of choices

High

Presence of lots of

competitors with

varieties of models

2Light Commercial

Vehicles

Low

Requires massive

capital, R&D and

brand recognition

Low

Light load hauling around

centers is currently

unmatchable by other

public transportation

Moderate

Due to the presence of

wide variety of choices

High

Presence of lots of

competitors with

varieties of models

3

Heavy

Commercial

Vehicles

Low

Requires massive

capital, R&D and

brand recognition

Low

Major intercity

connections, last mile

delivery, convenience for

heavy loads is currently

unmatchable

Moderate to Low

Less suppliers & less

substitutes

Moderate

Fewer players in the

market

4 Heavy Buses

Low

Requires massive

capital, R&D and

brand recognition

Moderate

Intercity & Intracity trains,

airplanes provide

moderate threat

Moderate

Less suppliers but

increasing number of

substitutes

Moderate

Fewer players in the

market

2

1

2

3

Daewoo commercial vehicle co. ltd, South Korea, held 25% market share in South

Korea specializing in heavy tonnage trucks (HCV)

By 2004, good growth in India (30-35% growth in car sales & truck sales volume) gave

Tata Motors good financial strength to expand overseas

Intention:

▪ Gaining market share in Commercial Vehicle segment & acquiring Technology rights

▪ Access to export markets using ‘Daewoo’ brand

▪ Creating a perfect strategy fit with Tata Motors, India

a) Tata motors, India – Low tonnage commercial vehicles & mainly domestic market

b) Tata Daewoo, South Korea – High tonnage CV & mainly export market

Performance:

All fig in USD Millions

▪ Gaining trust by long term investment in R&D with Daewoo

▪ Keeping the company predominantly Korean with management team as Koreans

▪ Strategic alliances with Indian subsidiary for joint Innovation

Results:

▪ Gained new market and expanded the market share. The aggregate growth in 10

years is 382% whereas the Industry growth is 150%

▪ Consolidation of domestic market

▪ Exports to mainly emerging economies like Vietnam & Philippines (Asia Pacific)

● Achieve a more prominent position in the international automobile marketplace

● Access to high level of technology and skills embedded in Jaguar Land Rover

● Allow to improve core products in India, for example, Indica and Safari

● Retain their identity, design and technical independence and image in the marketplace

● Synergize the capabilities and facilities between the 2 companies

● 100% Stake for Tata

● 3 plants and 2 design centers in the UK

● Diversity of business across markets and products

● Emerging markets such as China, Russia, and Middle East

Intention:

Performance:

▪ Due to the global meltdown, JLR lost $510 million in 10

months after acquisition

▪ The performance improved in 2009-2010 thanks to its new

sedans and emerging demand in China and India

▪ Joint venture factory with Chery Automobile to penetrate the

Chinese market

▪ Continue building global manufacturing footprints by

expanding to BrazilAll fig in USD Millions

▪ JLR is successful to diversify from the US and EU markets and create new demand in Asia

▪ Tata reduces the material cost by using the country’s vast natural resources

Hispano Caroccera, Spain started in the year 1947, became one of the leading bus and

coach manufacturer in Spain holding 25% market share by 2005

By 2005, Tata Motors acquired 21% stake and eventually bought out the firm by 2009

making it a 100% subsidiary of Tata Motors

Hispano had two manufacturing facilities, one in Spain and another one in Morocco

Intention:

▪ Gaining market share in Bus & Coach Segment in Europe

▪ Acquiring Technology rights

▪ Expand market share in the Bus & Coach Segment in Europe using brand “Hispano”

Performance:

All fig in USD Millions

▪ Investment was made in R&D facilities & establishing standard manufacturing

facilities

Performance:

All fig in USD Millions

▪ Gained 100% technology rights for fully built Bus & Coach segment

▪ Economic downturn in Europe and underestimation of Macro conditions

▪ Closed down Spain facility to consolidate efforts in Moroccan facility

▪ Have got an entry into European Bus & Coach segment albeit a shaky entry

Marcopolo is a Brazilian bus & coach manufacturer founded in 1949.

In 2006, Tata Motors & Marcoplo set up a joint venture for Indian market

Intention:

▪ Serving the growing Bus & Coach segment in India at appropriate price point

▪ Dominate the Bus & Coach segment in India and eventually start exporting

All fig in USD Millions

Considering Indian Economy in next 10 years, Tata Marcopolo is poised

for excellent growth in future

In 1984, Tata Hitachi is a joint venture between Tata Motors and Hitachi Construction Machinery.

The company offers all types of Earth-Moving machinery such as excavators,Loaders,

Soil compactor, Hydraulic crane,etc.

Intention:

● Entry into new market segment and access to technology.

● capture and dominate the Earth Moving machinery market in India.

Performance:

● The annual turnover of the company stands around USD 380 million.

● Two subsidiaries were also established in Spain to cover European market

What is Tata Motors overall M&A Strategy?

▪ Slow Transition from Passenger Cars segment into other segments in automotive

industry (LCV, HCV, Bus & Coach)

▪ Transition from mass produced passenger car market to Luxury car segment

▪ Strategic acquisitions focused at

a) Gaining immediate market share

b) Access to Technology

c) Getting the right price point & brand for the right market

Recommendations – The Future

▪ Continue expanding market share in LCV, HCV, Buses & Coach segments through

Strategic acquisitions & Organic growth within established subsidiaries

▪ Focus on moving towards more and more niche segments in Passenger car market

as the value is high like Luxury, Sports, etc

▪ Invest in R&D for Electric vehicle development as world will invariably move in that

direction

THANK YOU