Automotive Journal

Tata the giant Indian motor manufacturer acquired Land Rover and Jaguar in March 2008 for $2.3 billion, taking advantage of the weak Dollar. Tata appear to have got an excellent deal but only time will tell just how good a deal it proves to be. But what was this acquisition all about, an organisation that is part of a former colony, getting it’s own back on the British? The answer is that most specialists in the industry feel that it was a very well thought out and sound investment for Tata and that was Tata’s primary motivation. Everyone’s gain is someone else’s loss and Ford’s loss is considerable; they invested in all some $10 billion in the two companies and then to add to the pain a further $600 million was required to make up the shortfall in both Jaguar’s and Land Rover’s employee pension fund. Although when you consider Daimler Benzs loss over its purchase and sale of Chrysler it doesn’t look so bad; Daimler Benz put a reported $36 billion into Chrysler. Nine years on they found themselves in a position where they had to sell the majority of the company (80.1%) for $7.4 billion. There is always a risk with these acquisitions but if you can buy at the right price, which Tata appear to have done, it’s a very good start.

How will this change things for the two companies? The likelihood is very little will change at Land Rover; the Range Rover Sport will continue to be ordered in large quantities by contract hire companies that are still having difficulty in meeting demand. The Discovery and Freelander models are also very popular and selling well. The demand for Land Rover continues in spite of all the attention it attracts from critics, who say the vehicles use far too much fuel. The company is very profitable. Changes will probably be needed in Jaguar.

It is however in the area of fuel efficiency where the real challenges lay ahead; although motorists continue to buy vehicles with high fuel consumption, governments are setting targets which will have to be met in order to reduce carbon dioxide emissions. The most economical Land Rover model, the Freelander, doesn’t come close to meeting the proposal by the European Union of a carbon dioxide output of 130g/km across a manufacturer’s range of models. The system that switches off a car engine each time it comes to a stop in traffic is to be introduced to the Freelander in 2009. However making all their models lighter is something that Tata will also have to look at.

A major benefit to Tata as a result of the purchase of Jaguar and Range Rover will be the latest technology that they are acquiring. There own cars are very old fashioned; perhaps more like the cars we were producing in the 1950’s. It presumably won’t be long before they start to harness that technology and apply it to there own production.

When Ford Acquired Jaguar it was generally felt that they interfered too much with the day to day running of the company, Jaguar has always needed its independence and as can be seen from the days of British Leyland, doesn’t function well when there is outside interference. This is going to present a real challenge for Tata, because the fact is the company is loosing money, so something needs to be done. Ford made great advances with Jaguar’s manufacturing technology but the company has failed financially. Tata needs to find a way of turning that around.

The X Type Jaguar is an example of how Ford disrupted the Jaguar tradition and produced a small economical model aimed the mass market but that is not what Jaguar is about. The model was aimed at the BMW 3 Series buyer but completely failed to attract the younger buyer. Instead it attracted those who had retired and wanted a Jaguar but not a large car. The more they bought the X Type, the more they put off the younger buyer. Jaguar tried to change the car’s image through advertising but it didn’t work. Many observers thought they would scrap the X Type but it continued in production. At least in other countries it does not have the same image problem as in the UK.

It is likely that Tata’s intentions are for Jaguar to concentrate on producing high quality prestige cars and distance itself from Ford’s plan to make Jaguar a mass production car; a move that stemmed from Ford’s fear that motorists were going to turn their backs on large luxury cars. In spite of government and environmentalists’ attempts to stigmatise large engine cars, they remain highly popular amongst those that can afford them. Contract hire companies report little change in the public’s buying habits.

The new XF model is a beautifully designed car that should get Tata of to a very good start, particularly in the American market, where Jaguar sales have suffered in recent years. Overall the takeover of the two companies will almost certainly prove to be a good thing. Tata have made it clear that they are not interested in meddling with either Land Rover or Jaguar. Ratan Tata is reported to have said, “We want to retain their image, touch and feel”. Some have commented that it is a shame that the companies have fallen into foreign hands but of course they were already in foreign hands and many people would be surprised to learn that Tata already owns British Steel and Tetley Tea. In any event contract hire companies, which nowadays are by far the biggest buyer of all vehicles, will be watching developments with interest.