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TATA Nano in Brazil. April 28, 2010. Team Sam Allin, Prakash Hari, Georgina Javor, Federico Ochoa, Gordon Zheng. TATA Motors. India’s largest automobile company World’s 4 th largest truck, 2 nd largest bus manufacturer Cars, light to heavy commercial vehicles & engines Tata Group - PowerPoint PPT Presentation
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April 28, 2010
Team Sam Allin, Prakash Hari, Georgina Javor, Federico Ochoa, Gordon
Zheng
India’s largest automobile company World’s 4th largest truck, 2nd largest bus manufacturer Cars, light to heavy commercial vehicles & engines
Tata Group Interests in steel, autos, IT, communications, power
generation
Financials - 2009 Gross revenues - $6.04 billion - Growth of 46% Equity - $1 billion Sales - 30% growth from 2005 to 2009 Cash flow - $845 million in last 4 years
Global expansionAcquisition Joint Venture
Political Historically unstable, but stable and thriving economy since
2002 President Lula da Silva
Economic GDP - $1.48 trillion ($ 10,514 per capita - PPP adjusted ) Import Substitution Export-Oriented Model Inflation < 4.2% 1USD = 1.8 Real; 1 Real = 25 Rupee; as of 2010
Social Population - 198 million Uneven wealth distribution - Top 20% has 65% wealth Regressive tax system
Technological Major industries : Textiles, chemicals, aircraft & motor vehicles Investment in bio-fuel technology, consumes 54% ethanol vs
46% petrol
Tata Nano Cheapest car in the world - India MSRP is $2,500 USD Fuel efficiency - 61 mpg / 52 mpg Variants: Diesel, electric, hybrid
Brazil Car Market 4th Largest producer and consumer of automobiles in the
world Cheapest new car for the Brazilian market: Fiat Millie
USD $11,000 Export oriented, with 35% import tariff 1 out of 7 people own a car in Brazil
Fiat Millie
Joint Venture with Fiat Model on the successful joint venture in India Tata Motors will own the manufacturing plant Distribute via Fiat’s existing dealership network Fiat: 25% market share and strong brand in Brazil
Financial Analysis
Future access to Latin American Markets Mercosur Trade Agreement - Latin America Min. 60% indigenous manufacture Traded duty free in the
region
Selling Price $3,750
Cost of Manufacturing Plant
$500 million
Profit per Car $172
Return on Investment 17.15% (At full capacity)
Risks Mitigating FactorsFinancial/currency
Most expenses are up front; eventually, both revenues and expenses will be in Reais (ROI risk remains). Central bank independence.
Suppliers Source parts from suppliers both in India and Brazil
Joint venture Relationship with Fiat has been mutually beneficial since 2006
Market/Brand Fiat’s support together with Tata’s reputation in India
Competition First mover advantage
Political Stable political environment over the last 10 years (democracy, checks and balances)
PROFIT ANALYZIS SOURCES OF FUNDS
Price $ 3,750 Cash equity from Tata motors $ 250,000,000
Bank financing $ 300,000,000
Production $ 2,200 Total sources of funds $ 550,000,000
Ethanol increase 10% of production $ 220
Fiat commission $ 188 USES OF FUNDS
Total variable costs $ 2,608 Manufacturing plant in Brazil $ 500,000,000
**Other expenses $ 50,000,000
Contribution margin $ 1,143 Total uses of funds $ 550,000,000
fixed cost per car $ 971
Profit per car $ 172
Expected number of cars to be sold 250,000
Total profit $ 42,875,000 ROI 42,875,000/250,000,000 =17.15%