Of the Tata – Jaguar Deal

jaguar.jpgRatan Tata must have some strong plans in mind. Otherwise, he would not have bought two prominent luxury car brands, suffering losses of an estimated $15 billion for the past two years, for a cool $2.3 billion. From the Nano to the Jaguar, he is taking Tata Motors places, quite literally. On the platter is something for everyone, from the lower middle to the super rich. Tata has generated buzz across the globe with the Nano, and it is time again for it to take center stage with the Jaguar and Land Rover deal in its kitty.

It is one of the biggest achievements for an Indian auto company. With this landmark deal, Tata introduces itself to sophisticated technology. Experts believe that researching on and developing a luxury car without necessary technical know-how would have taken the company three to five years, just as the making the Nano from zilch took them four years. And who knows, with this mechanical knowledge, Tatas could also be giving the market new versions of the Jaguar and the Land Rover in the near future, innovated and perked up.

India has about 50 Jaguar owners and 200 Land Rover owners. The number is small, true. But when it comes to luxury brands in India, it is a lucrative and growing market. The cars, when imported, come with a duty of 181 per cent, which more than doubles their cost. Whereas bringing parts of it and assembling the car here in India costs much less. Nevertheless, one will have to wait and watch what the company’s strategy will be. If they set up shop in India, other luxury car brands such as BMW and Mercedes would be in for some tough competition.

India is a booming economy with new technological developments and an ever rising GDP. And now, Tata has given it a start to enter the big league of international market with purchasing two of the world’s largest luxury car brands. It is going to give Tata Motors publicity on an international scale, and will place the company among the world’s top automobile companies.

Ratan Tata has taken his family business to new heights. He may not be the richest Indian yet, but his growing business empire is taking on the world for sure, functioning in over 80 countries word wide, spread over six continents. The question which arises hereafter is whether he will be able to resurrect the two brands from their losses. This deal would be called a profitable one only when we see Tatas cash registers ringing and it earning back its investment, and more.

Indeed, this pact has put India on the global map in a big way. But there are certain drawbacks attached to deals such as these. Firstly, they eat up the country’s precious foreign reserve. Paying almost $3 billion to Ford will lower the government’s reserve by quite a few notches. One might argue that the foreign reserve will return with Tata selling cars to overseas clients under the trademark names. But that depends on whether they are able to earn a profit out of the plummeting brands. Secondly, Tata plans not to change the current employee structure at Land Rover and Jaguar, meaning the country’s employment rate does not get any assistance from this deal. It remains as it was before. Only if they set up offices here or appoint Indian officers there would this pact benefit the Indian public by generating employment. Lastly, if the two brands continue with their series of losses, which had reached almost $15 billion in the last two years, this deal would prove very costly to India, and especially to Tata Motors, whose annual turnover is almost 3 per cent of the country’s GDP.

Shalini Rajvanshi

[Image Source :http://www.iii.co.uk/icons/Reuters/2008-03-18T122649Z_01_NOOTR_RTRIDSP_1_OUKBS-UK-FORD-TATA.jpg ]