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WIKI ANALYSIS
Established in 1945, Tata Motors Limited (NYSE:TTM) is India's largest automobile company with revenues of Rs. 703 billion crore in FY 2009.[1] It is the largest producer of commercial vehicles, and the second largest in the passenger vehicles market in India. The company is the world's fifth largest medium and heavy commercial vehicle manufacturer, and the world's second largest medium and heavy bus manufacturer.
Over 4 million Tata vehicles ply on Indian roads. It is the first company from India's engineering sector to be listed in the New York Stock Exchange. In its efforts to internalize its operations, Tata Motors acquired the Daewoo Commercial Vehicles Company, Korea's second largest truck maker.[2] Two-thirds of heavy commercial vehicle exports out of South Korea are from this subsidiary. It also acquired Jaguar Land Rover to gain a foothold in the luxury sports car and SUV market.[3]
Company Overview
Tata Motors has transitioned into a range of activities all related to the automobile industry. Through its subsidiaries, the company is involved in engineering and automotive products, construction equipment manufacturing, automotive vehicle components manufacturing and supply chain activities, machine tools and factory automation products, high-precision tooling, electronic components for automotive and computer applications, and automotive retailing and service operations. The company's manufacturing base is spread across India. In the east they are based in Jamshedpur (Jharkhand). Pune (Maharashtra) is their main centre for the west. In the north Lucknow (Uttar Pradesh) and Pantnagar (Uttarakhand).[4] A new plant to manufacture Nano which was being constructed in West Bengal has been moved to Kuch District in Gujarat.
TTM focuses on Research and Development and has over 2,500 engineers and scientists working for the company’s Engineering Research Centre.[4] The company has R&D centres in Pune, Jamshedpur, Lucknow, in India, and in South Korea, Spain, and the UK. It has developed the first commercially viable prototype of air power car.[5] The company’s dealership, sales, services and spare parts network comprises over 3500 touch points; TTM also distributes and markets Fiat branded cars in India.[4] The company also has a strong auto finance operation, TML Financial Services Limited, supporting customers to purchase Tata Motors vehicles. The company actively markets its passenger cars and commercial vehicles to countries in Europe, Africa, the Middle East, Australia, South East Asia and South Asia. It has its operations in more than 40 countries across six continents, and its companies export products and services to 140 nations.
Company Overview
Business Segments[6]
Tata Motors operates in four main automobile segments which cover the range of products in the automobile segments in India.
Passenger Cars:(31.8% of total units sold) This division also distributes Fiat branded cars in India. TTM has a presence in the compact car, mid-sized car and station wagon segment of the market in the form of Indica, Indigo and Indigo Marina and their variants. All the passenger cars are manufactured at plants at Pimpri and Chinchwad district in Maharashtra.
Tata Motors is in the process of launching "Nano", an affordable family car with a price tag of Rs. 1,00,000(around $2200) for the developing world. The project was delayed as the public opposition and political problems forced the management to abandon the plant site at Singur, West Bengal and shift it to Gujarat.[7]
Utility Vehicles:(23.7% of total units sold) TTM entered the utility vehicle with the launch of Tata Sumo in 1994. Later it also entered SUV segment with the launch of Tata Safari in 1998.
Light Commercial Vehicles:(23.9% of total units sold) TTM manufactures light commercial vehicles including pickup trucks, trucks and buses with gross vehicle weight (GVW) of between 0.7 ton and 7.5 tons. TTM entered this category by indigenously developing a low priced product Ace(mini-truck) with a 0.7 ton payload.
Medium and Heavy Commercial Vehicles:(32% of total units sold) TTM manufactures medium and heavy commercial vehicles which include trucks, buses, dumpers and multi-axled vehicles with GVW of between 9 tons to 49 tons. In addition, through Tata Daewoo Commercial Vehicle Company Limited, or TDCV, a wholly-owned subsidiary in South Korea, TTM manufactures high horsepower trucks ranging from 220 horsepower to 400 horsepower, including dump trucks, tractor-trailers, mixers and cargo vehicles.
Business Growth
FY 2009 (ended March 31, 2009)[1]
- Net revenue nearly doubled to Rs. 703 billion.
- The company incurred a net loss of Rs. 61 million, compared to a net gain of Rs. 23 million in the prior year.
Key Trends and Forces
Economic slowdown resulting in adverse impact on the sales
Automobile industry is a cyclical industry. It is substantially affected by general economic conditions. The demand is influenced by factors including the growth rate of the economy, easy availability of credit, increase in disposable income, interest rates, freight rates and oil prices. Lack of vehicle finance availability, lower growth on GDP and/or increases in fuel prices lead to a decline in the demand for automobiles. The decrease in freight rates due to slowdown of economy also leads to decrease in demand for commercial vehicles as expansion of fleet size is stopped. All these factors have affected the sales of TTM. In Feb 2009, the sales in commercial vehicles segment showed a decline of 53% as compared to that of Feb 2008.[8] Furthermore, the turnaround and integration of the Jaguar and Land Rover business, may also be affected as the operations in over 165 countries have to managed for the acquired companies.
Timely launch of new products and turnaround of Jaguar Land Rover
Tata Motors bought Jaguar Land Rover from Ford Motor Company for $2.3 billion. A bridge loan from a syndicate of banks was used to finance the deal.[9] The success of the takeover depends on the ability of TTM to fully integrate with Jaguar Land Rover and turn around the Jaguar Land Rover business. The economic slump has led to a drop in sales of the cars and made turnaround of the business difficult. TTM had to refinance the bridge loans in order to adjust for the lower sales.
TTM has lost market share in its passenger car and utility vehicles segment because of no new product launch. Although new variants have been introduced time and again, they have not been able to sustain the consumer interest as competitors have come up with new product launches. The Nano plant in Singur, West Bengal also had to be abandoned because of public protest and political complications. This has caused delays in the launch of Nano, which was originally scheduled to be launched in Feb 2009.
Currency and exchange rate fluctuations and its adverse effects on the earnings
The value of the Indian Rupee(INR) compared to the U.S. dollar impacts the value of ADR shares of TTM and its business operations. Tata Motors stock is listed on the NYSE.[10] An increase in the value of the INR translates to higher share price and dividend payments in the ADR shares all else constant. An appreciating INR can purchase more U.S. dollar. However, on the flip side, a strengthening INR adversely impacts the export earnings of TTM.The Company’s exports constitute 9.8% of the revenues and imports constitute 4.6% of material consumption. TTM undertakes steps to hedge the currency risk for its operational requirements, but a weakening of the rupee against the dollar or other major foreign currencies adversely affects the cost of borrowing and consequently increase the financing costs. Additionally, with the acquisition of Jaguar Land Rover, around 66% of TTM revenues are contributed by this subsidiary. The fluctuations in the value of the British Pound against the dollar and other currencies such as the Indian Rupee would affect the net profits.
Competition
Passenger Cars:
- Maruti Suzuki India - Based in New Delhi, India. Maruti Suzuki India Limited is a subsidiary of Suzuki Motor (SZKMF) Corporation. It was formerly known as Maruti Udyog Limited. The Group's principal activity is to manufacture, purchase and sale of motor vehicles and spare parts. The Group is a subsidiary of Suzuki Motor Corporation. The other activities of the Group comprises of dealership network of Pre-Owned Car Sales, Fleet Management and Car Financing. The Group also provides services like framing of customized car policies, economical leasing of cars, maintenance management, registration and insurance management, emergency assistance and accident management. The product range includes ten basic models with more than 50 variants. The Group has operations in over 1220 cities with more than 2628 outlets and also exports cars to other countries. It also exports its products to Asia, Africa, and South and Latin America.
- Hyundai Motor Company - Based in Seoul, South Korea, Hyundai Motor Company manufactures and distributes motor vehicles and parts worldwide. It offers passenger cars, recreational vehicles and commercial vehicles, including light commercial vehicles; medium and heavy duty trucks; special vehicles, such as refrigerated van trucks, dry van trucks, wing body trucks, and trailer wing body/bottle carriers; medium and large size buses; and bare chassis.[11]
- Honda - Headquartered in Tokyo, Honda Motor Co., Ltd., together with its subsidiaries develops, manufactures and distributes motorcycles, automobiles, and power products worldwide. Its motorcycle business manufactures motorcycles, all-terrain vehicles, and personal watercrafts. Honda’s motorcycle line consists of sports, business, and commuter models. Its automobile business offers passenger cars, multiwagons, minivans, sport utility vehicles and mini cars. The company also offers various financial services to its customers and dealers. In addition, it manufactures various power products, including power tillers, portable generators, general-purpose engines, grass cutters, outboard engines, water pumps, snow throwers, power carriers, power sprayers, lawn mowers, and lawn tractors. Honda sells its products through various outlets, wholesalers, and independent retail dealers.[12]
- Toyota - Headquartered in Toyota City, Japan, Toyota Motor Corporation operates in the automotive industry worldwide. It designs, manufactures, assembles, and distributes passenger cars, recreational and sport-utility vehicles, minivans and trucks, and related parts and accessories. It also offeres hybrid vehicles. Its products also comprise conventional engine vehicles, including subcompact and compact cars, mini-vehicles, passenger vehicles, commercial vehicles,auto parts, mid-size models and luxury models.In addition, Toyota offers sports and specialty vehicles, recreational and sport-utility vehicles, pickup trucks, minivans and cab wagons, trucks and buses. Further, the company provides finance to dealers and their customers for the purchase or lease of Toyota vehicles. Additionally, it is also involved in the design and manufacture of prefabricated housing and information technology-related businesses, including intelligent transport systems and an e-commerce marketplace, called Gazoo.com.[13]
Utility Vehicles:
- Maruti Suzuki India - Profile same as above.
- Swaraj Mazda - Headquartered in Nawanshahar district, Punjab, the Company's principal activity is to manufacture and sale of commercial vehicles and spares for both goods and passenger applications.[14] The company has inked a technical assistance agreement with Isuzu Motors. The agreement is for the expansion of vehicle production capacity, new assembly line for Isuzu vehicles and also setting up of in-house facilities for the manufacture of luxury buses based on existing Mazda and Isuzu chassis.
- Mahindra & Mahindra Ltd - The company manufactures a range of automotive vehicles, agricultural tractors, implements, and industrial engines. It is also involved in property development and construction activities. The company offers various multi-utility vehicles, light commercial vehicles, three-wheelers, and tractors as well as spare parts and related services. It also provides various services related to financing, leasing, and hire purchase of automobiles and tractors. In addition it also offers design and engineering services to the automotive, aerospace, and general engineering industries; and produces automotive components, as well as forgings, gears, steel, stampings, and special polymers. It is headquartered in Mumbai, India.[15]
Light Commercial Vehicles:
- Mahindra & Mahindra Ltd - Profile same as above.
- Ashok Leyland - Headquartered in Chennai, India, Ashok Leyland Limited Limited is involved in the manufacture and sale of commercial vehicles, and related components and accessories in India. The company offers various types of busses, trucks and other types of commercial vehicles; engines for industrial, genset, and marine applications; and defense and special vehicles. It also provides a range of spare parts for heavy engineering. It also offers design and engineering services to the automobile, power engineering, and aerospace sectors. In addition, it provides independent testing services in the areas of laboratory-based testing and data acquisition, simulation durability testing, NVH testing, road load data acquisition, safety testing and facilities management, and test laboratory consulting for auto original equipment manufacturers and their suppliers.
Medium and Heavy Commercial Vehicles:
- Ashok Leyland - Profile same as above.
References
- ↑ 1.0 1.1 TTM 2009 20-F "Selected Financial Data" pg. 1
- ↑ The Hindu, Tata Motors buys Daewoo unit
- ↑ BBC News, Tata buys Jaguar in £1.15bn deal
- ↑ 4.0 4.1 4.2 Tata motors website, company profile
- ↑ Tata Motors' air-powered car -- green portfolio candidate
- ↑ TMM 2009 20-F "Automotive Operatins" pg. 15
- ↑ Business week, India: Modi Wins as Gujarat Gets Tata's Nano Plant
- ↑ Wheels un plugged, commercial vehicles sales decline
- ↑ Yahoo Finance, Tata Motors keeps spending on Jaguar Land Rover
- ↑ NYSE euronext,Tata Motors Limited
- ↑ Hyundai Motor Co, Company Description
- ↑ Honda Motor Co. Ltd.,Company Description
- ↑ Linkedin, Toyota
- ↑ Alacra store, Swaraj Mazda
- ↑ Linkedin, Manendar and manendra
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